On the 7th October, the FCA wrote a portfolio strategy letter summarising its priorities and expectations for financial advisers and investment intermediaries over the next two years.

 

This important communication from the regulator is a key publication for the financial advice sector. It’s essential for CEOs and senior managers to review its main takeaways and ensure their firm can evidence the action they have taken in light of what the FCA has explicitly asked them to do.

At first glance, it’s a three-page letter, but when you take into account the ten hyperlinks attached, this is a detailed communication that firms need to examine in detail. The FCA does not attach hyperlinks unless it expects firms to read them and take appropriate action.

Two notable priorities that the FCA outlines are ongoing advice services and retirement income advice. These are both holdovers from the last portfolio strategy letter for this sector, published in 2022 and confirm the FCA believes firms still have progress to make in these critical advice areas.

Here are some top-line notes for CEOs and senior managers to keep front of mind.

Ongoing advice services

According to the FCA’s analysis, there’s been a surge in the proportion of ongoing advice revenue within firms, climbing from 60% in 2016 to 80% in 2023. And it’s anticipated to grow further still – with 90% of new clients expected to enter into ongoing advisory agreements.

This growth brings to light some concerns from the regulator. It has highlighted that firms may not be fully considering the relevance and costs of ongoing advice services, resulting in clients potentially being billed for undelivered services or for services that do not provide value for clients.

Therefore, it’s essential for firms to ensure they offer fair value that is tailored to each client’s unique situation, all within their agreed terms.

The FCA will be vigilantly monitoring advisers and intermediaries. The regulator wants to ensure that clients are not unfairly charged for undelivered services whilst also checking that appropriate record-keeping and oversight of these activities is happening. A further ongoing advice update from the FCA is due later this year (2024) following the completion of its current review.

Retirement income advice

The FCA signposted to its Thematic Review of Retirement Income Advice letter which was published in March 2024. All CEOs need to ensure that they can satisfy themselves that their firm has reviewed and updated their systems and controls based on the findings of the thematic review.

The regulator will be carrying out further work to assess if firms are delivering good outcomes for clients in this sector. With the amount of guidance the FCA has provided, there will be no excuses for firms not meeting the FCA’s expectations.

Consolidation

With the continued volume of acquisitions in the sector, the FCA has announced a multi-firm review. Areas of scrutiny mentioned include governance, oversight and controls, with a focus on how firms ensure their clients are receiving good outcomes. These firms need to start taking action now, based on the areas of focus stated in the letter, to prepare for an expected FCA visit.

TCC has the regulatory insight to assess any risk your firm may face for the assets under advice and retirement income provision it provides. Most importantly, TCC experts offer guidance on the restorative steps you can take to ensure regulatory compliance. Get in touch today to discover how we can help.

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