Posted: 3rd May 2024

The FCA has been critical of ongoing advice fees being levied by financial adviser firms, with the introduction of  Consumer Duty increasing the focus on this area. This has led to the FCA requesting data from 20 of the largest advice firms, and requiring a growing number of firms to appoint a skilled person.

The FCA are looking for the following information from firms:
  1. How many customers are due a review as part of ongoing suitability of advice
  2. How many received that review; and
  3. How many paid for ongoing advice but were subsequently refunded their fees because the review did not happen.

Our expectation is that following receipt of this information from the initial firms, that the FCA is likely to expand the survey to others.

In February the FCA also contacted Adviser firms to obtain information on their ongoing advice models and ask firms to provide information on any changes they had made since the introduction of Consumer Duty. The expectations are that firms will have examined their ongoing advice model to ensure it meets Consumer Duty outcomes, with a particular focus on the delivery of “fair value”.

Ensuring that ongoing advice fees are delivering fair value to customers is not necessarily as straight forward as it sounds. Clients have different needs and circumstances, and as such the value they might get from periodic/annual reviews might differ. This is particularly noticeable where the ongoing advice fee is a percentage per annum.

Many firms are also experiencing increased customer contact on this issue, directly and through claims management companies, in the form enquiries, DSARs and complaints. This is leading to significant operational challenges, and a lack of uncertainty about how best to resolve issues for customers whilst the FCA continues to gather information.

What steps can firms take:
  1. Manage immediate operational challenges. You may need to increase the resources, or deploy technology in your complaints function, to manage additional complaints and enquiries/DSARs, and reduce the impact on BAU complaint handling. Where complaints contain multiple points (some of which are unconnected to ongoing advice fees), you will want to define a clear complaint handling strategy to determine how you will prioritise and respond to different types of complaint. We recommend firms engage the FCA on this strategy. Firms should also consider how they best engage claims management companies to deliver good outcomes for customers.
  2. Analyse your client population, the ongoing advice fee structures that have been in place and the monitoring data you have. This will help fulfil the FCA request and start to enable you to examine any challenges you may have at a total population level.
  3. Seek independent support to review a sample of client files from segments of your population to understand what ongoing advice fees were charged, what reviews were conducted and assess the value the customer received on a file-by-file basis. This will help you identify how the value proposition is impacting clients at an individual level, and identify any potential remediation issues.
  4. Review your ongoing advice framework and charging structure to ensure it meets Consumer Duty requirements, and that it has a robust fair value assessment. This should include looking at a range of ongoing advice scenarios, the cost of undertaking the assessments and the benefits. As part of this review against Consumer Duty requirements, firms should consider:
    1. The policies, procedures and communication strategy that underpin the ongoing advice service, including when fees would be paid, the frequency of reviews and the quality and frequency of communications.
    2. The risks in this client journey and how those risks are mitigated and monitored, including appropriate outcomes testing/QA. This should also encompass a review of the governance model.
  5. If you have already made changes, it is important that you have documented the rationale behind the changes, and can evidence good outcomes under the revised structure. This is important to evidence compliance with Consumer Duty and an importance consideration for Annual Board reports.

Huntswood's experience and expertise uniquely position us to support investment management firms in meeting regulatory requirements, completing fair value assessments and providing independent reviews of advice files to aid firms in FCA engagement during s166 activity. We also offer recommendations for enhancing existing policies and procedures, along with mapping customer journeys to identify risks, controls and define appropriate monitoring. Our support even extends to the creation of audit trails, ensuring your rationale for changes is documented and supports governance procedures.


Contact Emma Mitchell, Director of Advisory Services

Emma Mitchell


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