The FCA’s long-awaited ongoing advice review findings are better than feared — but, says Chris Jones (pictured), Chief Product Officer, Dynamic Planner, firms can’t relax. Sharing his reaction to this latest news with us, Chris outlines why he believes that now is the time for advice firms to refine, innovate, and prepare for new ways to work with clients.
The FCA has published the long-awaited findings of its ongoing advice review – and they’re better than many feared. Back in December, the rumour mill had it that something existential was coming, but in fact the findings show firms covered by the review largely have their houses in order.
It’s no surprise to me that the 22 largest firms had delivered suitability reviews to 83% of their customers – and tried to deliver them to another 15%. Many of those firms are clients of ours, and we know they have the systems and management information (MI) in place to allow them to follow the regulator’s expected best practice suitably and efficiently, in a way that provides value to the end customer.
It’s good to see the regulator recognising that – and to see findings that are positive, rather than damaging, for an industry that plays such a vital role in our economy and in people’s lives.
At the same time, the FCA has delivered on its consumer protection obligations, putting responsibility where it belongs: on the firms themselves. If they’ve been delivering their reviews: great. If not, they need to pay that money back.
What happens next? What would I be doing if I was a smaller firm? I certainly wouldn’t be saying, ‘Well, that issue looks like it’s gone away.’ Like a teacher saying, ‘I know you’ll put those chocolates back on my desk when I turn my back,’ the regulator is signalling that it expects firms to do the right thing. It’s also told firms what that looks like, in the form of the best practice examples that accompanied the findings of the review.
Firms should set out clearly the nature and timing of the service they intend to provide in their client agreements and communications. They should have effective systems and adequate resources to ensure reviews are scheduled and offered in accordance with those agreements. And they should have policies in place to stop collecting fees where clients do not engage with the service offered over time.
Where the regulator found instances of poor practice, they were often down to ineffective controls, MI and record keeping. So smaller firms need to do what larger peers have done: get their tech right, get their systems in place, and make sure that they’re both providing their reviews and able to evidence that they’re doing so. And they have a brief window of opportunity in which to do that.
As we saw in December, the word on the street isn’t always right, but the expectation now seems to be that we’ll see another, broader review in May or June. The FCA has repeatedly told us that it’s now a data-driven regulator, and the likelihood is that it will come back and say, ‘Show us the data’.
The regulator has also signalled that it’s going to look at the rules relating to ongoing advice more broadly, as part of the ‘wider work’ that will follow the review. This is welcome.
At the moment, the emphasis on the annual review means firms feel tied to that model. But from a Consumer Duty perspective, why should clients have to have a suitability assessment every 12 months, even if they don’t want one, it doesn’t suit their lifestyle or isn’t affordable?
And why shouldn’t the industry offer a wider range of models to enable them to opt for something that does suit them instead – whether that’s an app-based service, or service on demand, or issuing guidance rather than full advice in certain instances. The best practice examples suggest that, in the future, the emphasis may not be on a one-size-fits-all approach, so much as on ensuring you meet the Client Understanding outcome when setting out the service you will provide.
With the Advice Guidance work underway as well, there’s an opportunity on the horizon for firms to find new models and new ways of working with their clients. And with the worry of this review out of the way, firms should be freed up to create and innovate.
Whether it’s to capture this opportunity, address the needs of an increasing digital population, or re-engage those clients who haven’t actually been receiving your ongoing service, it might be time to expand or reinvent your proposition.
