Much of the commentary around CP26/10, the FCA’s consultation on simplifying pensions and investment advice rules, has focused on the “death of the annual review”. In this exclusive article for IFA Magazine, Greg B Davies, Head of Behavioural Finance, Oxford Risk, explains why that framing is understandable but that it is also too narrow.
Many firms will keep an annual rhythm. It is familiar, easy to schedule, easy to evidence, and helps demonstrate ongoing value. But annual reviews should not be mistaken for suitability itself.
The question is whether firms can move beyond calendar-based suitability towards dynamic suitability.
Annual reviews provide useful discipline, but they are a poor proxy for client need. Suitability should respond when something meaningful changes in a client’s life, portfolio, behaviour or emotional comfort.
Dynamic suitability does not mean continuously reassessing every client in full. It means monitoring for whether reassessment, reassurance, adviser review, behavioural engagement or escalation is warranted. The discipline does not disappear. It moves from an annual appointment to a better governed question: what has changed, what matters, and what should we do about it?
When the calendar fails
The limits of calendar-based suitability became clear in March 2020. At the start of Covid, almost every adviser suddenly had clients whose financial circumstances had changed. Spending plans shifted overnight. Income streams dried up for many. Portfolio values fell sharply, then recovered with extraordinary speed. Anxiety spiked, but not uniformly.
Some clients needed immediate financial reassessment. Some needed reassurance. Some needed behavioural support to avoid selling or de-risking in panic. Others, despite the drama, were best served by doing nothing.
A cumbersome annual review process was woefully ill equipped to respond at scale. A dynamic suitability process could have monitored crucial changes, triaged where they mattered most, reviewed clients whose income, withdrawals, liquidity needs or portfolio reliance had changed, provided personalised engagement where anxiety or Behavioural Vulnerability threatened poor decisions, and left things alone where no intervention was needed.
Dynamic suitability is not about doing more to everyone. It is about doing the right thing for the right clients at the right time.
The future value of ongoing advice
The value of ongoing advice should not be judged only by whether it produces a new recommendation.
Often the most valuable thing an ongoing service does is help a client understand, maintain and stay with an existing suitable strategy, especially during market stress, life events, retirement transitions or periods of reduced confidence.
This should not be dismissed as “just communication” or “just marketing”. Behavioural engagement, done properly, is a genuine client-outcome service. Helping people stay with good decisions is one of the ways Consumer Duty becomes practical.
CP26/10 therefore makes behavioural engagement more important. A more proportionate, less prescriptive suitability regime places greater weight on firms’ ability to evidence that they deliver good outcomes, avoid foreseeable harm, and support clients in pursuing their financial objectives.
The question is no longer simply “have we reviewed the file this year?” It is “are we giving this client the right support, at the right moment, in the right way?”
Simplification must not become minimalism
The FCA is rightly trying to reduce unnecessary friction. Advice processes have too often become defensive, repetitive and overburdened with information that does little to improve either the recommendation or the client’s understanding.
But if firms interpret “sufficient information” as “as little information as possible”, simplification becomes minimalism. Proportionate does not mean thin. It means precise.
Firms should collect the information that matters for the client, the decision, the product or portfolio, the scope of service, and the foreseeable harms that might arise if relevant information is missed. That includes behavioural information.
Low Confidence, low Composure, high Impulsivity, avoidance, anxiety, misunderstanding or disengagement can all affect whether a client achieves a good outcome. Where engagement is low, information is thin, or Behavioural Vulnerability is elevated, firms should apply stronger guardrails, clearer communication and more active escalation.
Less engagement should not mean less care.
A low attitude to risk is not a life sentence
One of the industry’s most persistent blind spots is over-reliance on attitude to risk.
Attitude to risk is important. But it is not suitability. A suitable risk recommendation must also reflect financial ability to bear risk, knowledge and experience, and Behavioural Capacity.
Oxford Risk’s recent analysis of more than 87,000 investors found that more than half had a higher Suitable Risk Level than their attitude to risk alone would indicate. Using attitude to risk as the main anchor therefore risks systematically under-risking a significant proportion of clients.
A young saver with stable income, meaningful saving capacity and decades ahead should not be condemned to an unduly cautious portfolio solely because they have a low attitude to risk. Their future income and savings capacity are part of their ability to bear investment risk.
The opposite risk can arise in retirement, when earned income falls, withdrawals begin, sequencing risk increases and reliance on the portfolio rises. If suitability processes are too static, portfolios can fail to respond when the financial basis for risk-taking changes.
Some sophisticated-looking risk profiling tools measure numeracy, experience, framing sensitivity or momentary anxiety more than stable long-term willingness to take investment risk. Complexity is not the same as quality.
AI can help, but it cannot carry accountability
AI can help summarise client information, identify behavioural signals, draft clearer communications, and personalise engagement.
But AI should sit on top of governed, explainable and, where appropriate, deterministic suitability logic. It should not replace that logic. Black-box personalisation is not accountable advice.
CP26/10 should not be read as permission to do less. It is an opportunity to do better.
The firms that benefit most will build advice and support models around the real drivers of client outcomes: valid profiling, financial capacity, Behavioural Vulnerability, personalised engagement, dynamic monitoring and governed technology.
The real prize is advice that responds to the client, the decision and the moment. That is harder than an annual review rule, but much closer to how outcomes are actually achieved.
“Dynamic suitability is not about doing more to everyone. It is about doing the right thing for the right clients at the right time.”
Greg B Davies, Head of Behavioural Finance, Oxford Risk
