Greetings – Mike here, taking care of business while Mark sees various folk and scowls at the price of coffee in London. Only one topic of discussion this week, the FCA’s ongoing advice review, so without further ado we’ll get straight to it.
Like a last-minute Finn Russell conversion attempt, rumours of the review being bad news for the IFA profession were wide of the mark. If you need a quick reminder of the history, over a year ago (!) the FCA flagged concerns “that it appeared some consumers may be paying for a service, such as an annual review, but were not receiving it”.
Fast forward to Monday, and these concerns are mostly unfounded. Based on the data received from 22 of the largest advice firms, annual suitability reviews were delivered in 83% of cases. For 15% of cases, clients either declined or did not respond to the firm’s offer of a review. In fewer than 2% of cases the firm had not attempted to conduct a review and presumably are in the process of paying redress.
These results are a real positive for the advice profession. It removes a cloud that had been lurking on the horizon for over a year and, whilst the regulator was right to ensure these services were being delivered as promised, I’d have been astonished if they had found anything different. Every time we ask the most important person in this debate (the end client) whether they are happy with the services they are receiving from their adviser the responses are overwhelmingly positive. Over the last 18 months we’ve done exactly that here, here and here. We’ll be repeating these studies again in 2025.
It’s not all cut and dried though. For the 83%, on the assumption these services represent fair value then all good. And as per above, the 2% should be firmly on the naughty step conducting a redress exercise. The middle 15% are where the issue lies. The FCA define this segment as clients who “had either declined the review or not engaged with the firm’s request for the information needed to conduct a review”.
We looked at this issue as part of our latest State of the Advice Nation research. Pleasingly, we found a similar split between reviews being delivered or not, but we also looked into the process of chasing and ultimately disengaging clients if, for whatever reason, the review doesn’t take place. 28% of firms will disengage within 1 or 2 months of a review being missed, with 23% waiting at least 6 months. Only 10% will let it go on for more than a year.
As part of the release on Monday, the FCA committed to “review the rules on ongoing advice to make sure they remain fit for the future”. The issue of how to deal with the 15% is one area that could benefit from some good practice guidance (how quickly firms should disengage, what does that actually look like etc) but creating additional/new rules would probably be overkill. Consumer Duty already provides the framework here, and if necessary, the stick. One final thought. Now that the question of ongoing services by the advice profession has been put to bed, how about doing the same for product providers? Are they delivering good services, as defined under the consumer support Consumer Duty outcome? The FCA said on Monday they will be reviewing the ongoing advice rules “to make sure they remain fit for the future and help as many people as possible to get good support in managing their financial lives”. It strikes me that a good way to help achieve this would be to ensure all providers are following the rules introduced over 18 months ago by Consumer Duty. Perhaps the findings from their Vulnerability Review, due in the next fortnight, will be the first step in this direction. Stay tuned to find out…
And to close, RIP Roberta Flack.
