Ongoing financial advice services

We set out findings from our review of whether financial advisers are delivering the ongoing advice services that consumers have paid for.

Financial advisers can charge their clients for ongoing advice and related services.

We were concerned that ongoing advice services, which can be of great benefit to consumers, may not always have been delivered where they should have been, so we carried out a piece of work to assess this.

On 15 February 2024[1], we wrote to 22 of the largest advice firms asking for information and data on their delivery of ongoing advice covering the previous 7 years.

Our sample firms offered a wide range of services which generally included ongoing suitability reviews as part of their ongoing advice service. As such, our review focused on delivery of suitability reviews.

Overall, based on the data provided to us, these reviews were delivered in around 83% of cases. In a further 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 this will need to be put right. Therefore, we do not currently view this issue to be systemic but will continue to monitor the situation.

All firms should read our findings and take the necessary action to make sure consumers are getting the service they are paying for.

1. Introduction

This review aligns with our work to ensure the UK has a vibrant and sustainable financial advice market.

Firms can charge consumers for ongoing services that include personal recommendations and related services or related services alone, provided they relate to an earlier personal recommendation provided by the firm. About 80% of revenue from adviser charges relates to charges for ongoing services from around 4 million clients.

What constitutes ongoing advice can be broad. The services offered by firms vary and are set out in individual client contracts. Generally, they include ongoing suitability reviews. They can also include related services like performance reviews, arranging transactions or managing a relationship between a retail client and discretionary investment manager.

At its heart, a well-delivered ongoing service should be a beneficial and trusted relationship between client and adviser, and one that can last for many years, tailored to the needs of the client. The exact nature of services desired, promised and delivered may differ from relationship to relationship, meaning that individual facts and circumstances are important in assessing the service.

The data showed that reviews were delivered in the majority of cases but it should be noted that:

There were differences in the results across the firms in our population.
Our population was not a representative sample.
A small subset of firms were not readily able to provide data for all of the years we requested.

Firms should review our findings and consider whether:

They have delivered all the services they were required to deliver.
A remedy is required.

We have summarised our existing rules and guidance on adviser charging and ongoing services below to help firms.

2. What we found

The data we were provided with shows us that in 83% of the cases where suitability reviews were promised they were delivered.

In a further 15% of cases, clients had either declined the review or not engaged with the firm’s request for the information needed to conduct a review.

We are most concerned about the fewer than 2% of cases where firms reported they had made no effort to deliver the suitability review to clients. In these cases, it is likely redress will be due.

Where a firm has been ready, willing and able to provide suitability reviews, but a client has consciously declined the service in any given year, we consider it less likely that redress will need to be paid. Where the client has declined the service over a number of years, firms should discuss with the client whether continuing with the service is still in their best interest.

We also recognise that there may be circumstances where firms have made reasonable and proportionate attempts to engage with clients to conduct suitability reviews without success. We generally expect that firms will need to have some engagement with their client in order to carry out a review. In these situations we expect redress to be less likely, however, a firm should have considered whether an ongoing service is in a client’s best interest if they’ve persistently not engaged.

Good practice

Through our review, we found good practice, such as:

Client agreements and relevant consumer communications that clearly set out the nature and timing of the ongoing service.
Effective systems and adequate resources to ensure suitability reviews were scheduled and offered as agreed.
Policies in place to stop collecting fees where a client had not engaged with the service for a period of time.
Appropriate record-keeping to make sure firms can evidence delivery of their services where provided.
Where suitability reviews were provided, ensuring:
- Clients’ circumstances, objectives, attitude to risk and capacity for loss were up to date.
- Risk profiles, charges and performance of existing investments were reviewed and recorded to make sure 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 practice

We found poor practices, such as:

Client contracts without a clear description of the services to enable the customer to understand what will be delivered throughout the relationship.
Ineffective processes, controls and monitoring to make sure services were delivered in line with contractual obligations, and that advice provided met regulatory requirements.
Insufficient management information to allow senior management to have adequate oversight of the services.
Inadequate record-keeping to make sure firms can evidence delivery of their services.

3. Next steps for firms

Firms should consider our findings and whether they can evidence that they have delivered all the services they were required to deliver, as set out in their contracts or as required by our rules. Consideration should include whether it would be appropriate for them to proactively contact customers to assess if any harm was caused as a result of any identified problems or failings.

We believe firms carrying out proactive reviews should look back to 2018. We consider this may be an appropriate period, given:

Our record keeping requirements.
Many of the regulatory requirements relating to annual suitability reviews came into force in 2018 (ie relating to Markets in Financial Instrument Directive (MiFID) II and investment-based insurance products).

Under the Consumer Duty and Dispute Resolution: Complaints Sourcebook (DISP)[2], firms must take appropriate action if they identify, through complaints or otherwise, that retail customers have suffered foreseeable harm as a result of acts or omissions by the firm.

If firms receive complaints from customers about delivery of ongoing services, they should handle these in line with their obligations and the rules set out in DISP.

Firms should also consider whether it would be appropriate in all the circumstances to pay redress: see DISP 1.3.6G[3] and PRIN 2A.2.5R[4]. There may be circumstances where it would be appropriate for firms to consider providing redress only in respect of part of the charges levied taking account of relevant circumstances and obligations, for instance to account for services that have already been delivered to the client (but this will be fact dependent).

We will monitor complaint numbers and intend to conduct further work later in 2025, to assess how firms have responded to the issues we have identified and review actions that they have taken. This will include considering whether appropriate remedies are being applied.

4. Next steps for consumers

We expect firms to proactively review our findings and reach out to impacted consumers. However, if a consumer is concerned they may not have received the services owed to them, they can raise any concerns with the firm.

Consumers do not need to use a claims management company. It is free and simple to complain to a firm[5].

Free guidance is available from MoneyHelper[6].

If consumers are unhappy with the firm's decision or don't hear from them within 8 weeks of complaining, the Financial Ombudsman Service[7] may be able to help.

5. Wider work

It is over 12 years since the introduction of the Retail Distribution Review requirements.

In this time, new business models and technologies have come to market, and consumer needs are changing too. Some respondents to our publication in July 2024 on the review of the requirements following the introduction to the Consumer Duty[8] have also requested we consider our rules for ongoing advice in light of these market developments.

We plan to review the existing rules relating to financial advisers' ongoing services to make sure they stay up to date and relevant.

We will engage with the sector in 2025 on this review.

We want to help the market develop for the benefit of consumers and ensure a trusted and thriving financial advice sector. This involves increasing the percentage of the population that gets support with their financial lives, with access to a range of different services according to their needs. We have set out significant proposals to help achieve this, such as the Advice Guidance Boundary Review[9].

Annex: Conduct of business rules and guidance

To help firms, we have summarised some of the key rules and communications for ongoing services.

Ongoing services: key rules and communications

The Retail Distribution Review (RDR) introduced rules on adviser charging in 2012. These rules apply where firms make personal recommendations to retail clients. Under these rules, firms can only be remunerated for the personal recommendations or related services that they provide by way of adviser charges. Where firms provide ongoing services, the adviser charge must be for the provision of ongoing personal recommendations or related services. Firms can only charge clients if the services and the right to cancel those services have been properly disclosed to the client (see COBS 6.1A.22R[10]).

The Markets in Financial Instruments Directive II (MIFID II)[11] and the Insurance Distribution Directive (IDD)[12] introduced additional requirements where periodic suitability assessments were included for certain services, which have applied since 2018.

Under the adviser charging rules, firms can charge for ongoing services that include personal recommendations or services that are related to a personal recommendation provided to the client at that time or earlier. However, firms should have regard to their requirements to act in their client’s best interests, and more recently in accordance with their obligations under the Consumer Duty[13], when determining their charging structure.

When firms provide ongoing personal recommendations, any suitability reviews should be carried out in line with the requirements in COBS 9[14] or COBS 9A[15], depending on the type of product. Where COBS 9A applies, ongoing suitability reviews must be carried out at least annually.

Related services, as set out in COBS 6.1A.6R and 6.1A.6AG[11], include:

Arranging or executing transactions recommended by the firm and conducting the associated administration tasks.
Managing a relationship between a retail client and discretionary investment manager or providing a service in relation to the managed investments.
Recommending a discretionary investment manager if also providing personal recommendations or other services that may include providing information relating to retail investment products or passing on information from the discretionary investment manager.

In our Factsheet: ‘Adviser charging’[16], we referred to providing performance reviews of a client’s investments as an example of an ongoing service.

Client contracts to deliver ongoing services must at a minimum meet the regulatory requirements specified above and be clear on the type and frequency of services to be provided.

Firms also have obligations under the FCA’s Principles for Businesses[17], as well as under any other relevant legislation and rules, and their contractual obligations.

Since the introduction of the Consumer Duty in July 2023, firms should also consider obligations under the Duty, notably regarding fair value under PRIN 2A.4.

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