Ongoing advice and the FCA – firms must continue to prepare

On 24 February 2025, the FCA profiled the initial findings of its investigation into the delivery of ongoing suitability reviews by financial advice firms. The headline figure is that only 2% of customers were not offered a regular suitability review. The FCA's review encompassed 22 of the largest financial advice firms, covering a period of seven years.

At first glance, this sounds reassuring message for firms, the industry, and their clients, however, beyond the headline, there are concerns about:

• The 2% of customers that were not offered these services.
• Some of the 15% that actively declined those services but may have continued to pay for the service for a prolonged period.
• The quality and record-keeping of the ongoing advice services that did take place.

FCA expectations

The FCA is expecting all firms to review their findings and proactively review ongoing advice from 2018 to determine whether they can evidence that ongoing advice services have taken place in line with expectations. Firms are expected to consider proactively contacting customers to understand the impact of any failings, and to remediate where appropriate.

They also ask customers who have concerns about whether they have received ongoing advice services to contact firms directly through the complaints process.

Our recommendations

Review Activity

Firms that are currently undertaking review and/or remediation activity should take a step back and consider whether the actions they are taking are aligned to the FCA’s review findings, and make modifications to methodology or customer contact strategies as needed to ensure alignment.

For firms that have yet to take substantive action on this, we would recommend:

1. Data is gathered and analysed, where available, to demonstrate the level of review activity has taken place.
2. Sampling (this will likely include customer outreach) across different cohorts of customers to understand:
    - Whether ongoing advice activity provided met the FCA expectations, and for customers who refused ongoing advice – did they do so repeatedly and/or were they informed of the consequences and costs of doing so.
3. One of the areas the FCA calls out, is whether customers were contacted during the review process to understand any changes in circumstances or objectives and ensure the ongoing suitability of investments.
4. Development of a redress framework, methodology and customer contact strategy based on findings. This needs to include allowances for any broader impacts failures to provide this service may have had on customers.
5. Set up and delivery of an efficient operating model to reach out to assess and remediate any impacted customers. This should look to leverage technology solutions where possible and high quality, cost-efficient on or offshore resourcing.

For many firms who are regularly receiving complaints on this issue, now is the time to consider wrapping this activity into the broader review and remediation process (if you haven’t already) to ensure a more sustainable, consistent and cost-effective solution.

Forward Fix Activity

We would recommend firms also re-examine any forward fix activity that has been put in place, in light of the following good and poor practices that the FCA has shared.

Good practices

1. Clear client agreements: Client agreements and relevant consumer communications clearly set out the nature and timing of the ongoing service. This transparency helps manage client expectations and ensures that both parties are clear on what is being provided.
2. Effective systems and resources: Firms had effective systems and adequate resources to ensure suitability reviews were scheduled and offered as agreed. This includes having the necessary infrastructure and personnel to deliver these services consistently.
3. Fee policies: Policies were in place to stop collecting fees where a client had not engaged with the service for a period of time. This practice ensures that clients are not charged for services they are not receiving.
4. Appropriate record-keeping: Firms maintained appropriate record-keeping to evidence the delivery of their services. This is crucial for demonstrating compliance with regulatory requirements and for providing evidence in the event of any disputes.
5. Comprehensive reviews: Where suitability reviews were provided, firms ensured that clients’ circumstances, objectives, attitude to risk, and capacity for loss were up to date. They also reviewed and recorded the risk profiles, charges, and performance of existing investments to ensure they remained suitable or identified whether an alternative recommendation was required. Communications to clients recorded the outcome of a review being a personal recommendation.

Poor practices

1. Unclear client contracts: Client contracts lacked a clear description of the services, making it difficult for customers to understand what would be delivered. This lack of clarity could have led to misunderstanding and, therefore, potential harm.
2. Ineffective processes and controls: Firms had insufficient processes, controls, and monitoring to ensure services were delivered in line with contractual obligations and that advice met regulatory requirements. This could result in inconsistent service delivery and potential regulatory breaches.
3. Insufficient management information: Firms lacked sufficient management information to allow senior management to understand performance. This seriously hinders the ability to monitor performance and make informed decisions.
4. Inadequate record-keeping: Firms had inadequate record-keeping, making it difficult to evidence the delivery of their services. This can pose significant challenges in demonstrating compliance and addressing client queries or complaints.

The FCA's findings underscore the importance of robust internal processes and effective management oversight. Firms must ensure that they have the necessary systems and resources in place to deliver on their contractual obligations and regulatory requirements. The FCA's ongoing scrutiny in this area means that firms addressing known gaps and forming a detailed understanding of the current state within their businesses, will be best placed to demonstrate best practice in this area.