Are your suitability reviews providing insight or just oversight?

What happened?

The FCA’s recent review of outcomes monitoring under the Consumer Duty highlights that the value of management information (MI) lies not in proving oversight activity has taken place, but in helping firms understand customer outcomes, identify emerging risks and take informed action. Firms should be able to explain what their information is telling them, what action it has prompted, and whether that action is improving customer outcomes. 

Against that backdrop, many advice firms are reconsidering the role of suitability reviews within their compliance frameworks. Most can demonstrate that reviews are completed – the greater challenge is understanding whether they identify emerging risks, explain recurring issues and provide meaningful evidence that good customer outcomes are being delivered. 

Actions to take

Turning review activity into useful insight 

Suitability reviews have often been treated primarily as a compliance exercise. A sample of files is reviewed, concerns are identified, and the activity demonstrates that oversight is taking place. While that remains important, compliance leaders increasingly need more. They need to understand not only whether advisers are producing suitable outcomes, but why issues arise, where risks are developing and where changes to training, processes or supervision could make the greatest difference. 

A well-designed programme should provide MI that helps firms assess whether client objectives are evidenced consistently, risk discussions are robust and ongoing services are delivered as promised. Across a meaningful population of cases, findings can reveal patterns and root causes that are difficult to see from individual results alone. 

In a recent poll conducted during TCC’s suitability review webinar, we asked respondents to identify their biggest suitability review challenges. Their answers pointed less to the cost of carrying out reviews and more to the difficulty of making those reviews genuinely useful: 

• Generating meaningful MI was the most frequently selected challenge, cited by 52% of respondents 

• Consistency and demonstrating Consumer Duty outcomes close behind at 48% each 

• Cost, by comparison, was selected by just 3% 

This is an insightful comparison to note as pressure for firms is not simply to complete more reviews, but to make sure the findings can be trusted, compared consistently and used to evidence whether good customer outcomes are being delivered. 

Watch the suitability reviews webinar on-demand  

Looking beyond the individual file 

Suitability reviews can highlight recurring themes that may be difficult to address through file-level monitoring alone.  

In some cases, a recommendation may be reasonable, but the file does not explain why it suits that client. Objectives may also be recorded but remain too broad, hard to measure, or are not clearly connected to the recommendation. Risk profiling and capacity for loss are another area where the quality of the supporting discussion is important.  

Firms may have established processes, but the documented rationale can become formulaic if it does not reflect the client’s individual circumstances. Ongoing servicing presents a similar consideration, as firms need evidence that services are being delivered consistently and remain relevant to clients’ needs. 

Viewed in isolation, these points may look like documentation issues. When similar observations appear repeatedly, however, they can suggest that firms should look more closely at adviser training, templates, guidance or supervision. That emphasis was reflected in a second poll conducted in TCC’s recent suitability webinar.  

When 28 respondents were asked which single improvement would deliver the greatest value: 

• the most common answer was better identification of root causes, selected by 36% 

• wider review coverage followed at 25%, stronger Consumer Duty evidence at 21% 

• more management insight at 14% and lower review costs at 4% 

• perhaps the most interesting finding was the gap between the importance placed on root-cause analysis and the importance placed on reducing costs 

While 36% of respondents identified better identification of root causes as the improvement that would deliver the greatest value, only 4% selected lower review costs. The results suggest that many firms are less concerned with reducing review activity than they are with making it more useful.

Recommendations

Focusing effort where it matters most 

Many firms are trying to balance rising regulatory expectations with finite compliance resource. Reviewing more files, lengthening templates or collecting more data may increase activity, but it does not necessarily follow that it will improve the quality of insight. 

A more proportionate approach focuses on review activity where it is likely to have the greatest impact. This means concentrating on the factors most closely linked to suitability and customer outcomes, including whether a client’s objectives have been properly understood, whether attitude to risk and capacity for loss have been assessed appropriately and whether the rationale for the recommendation is clearly evidenced.  

The aim is not to reduce standards, but to apply review effort intelligently. Not every file carries the same level of complexity or risk and firms may reasonably take that into account when designing an oversight framework that provides meaningful assurance while making effective use of compliance resources. 

A final poll conducted during TCC’s suitability webinar gives a useful indication of the operational pressure this can create. Of the 27 respondents: 

• 52% said they had confidence in their reviews but found them resource intensive 

• 37% struggled to review as many files as they would like, while the same proportion generated findings but not always insight 

• a further 26% wanted a more risk-based approach and 26% were reassessing their methodology. 

Again, because respondents could select more than one answer, the results should be read as a layered picture rather than a single conclusion. Firms may have confidence in their review conclusions while still facing constraints around coverage, resource and the insight generated. In that context, simply increasing review volume may not address the underlying challenge.  

Watch the suitability reviews webinar on-demand 

Three questions for compliance leaders 

For firms reviewing their suitability oversight arrangements, three key questions may be useful to consider. 

1. Is the programme delivering insight or mainly generating activity? 
2. Is compliance resource focused on higher-risk advice, advisers and client outcomes?  
3. Are findings being used to support coaching, strengthen controls, refine processes and improve the evidence around customer outcomes? 

Suitability reviews do not need to end with a file grade. Used well, they can help firms build a clearer view of customer outcomes, identify emerging risks, strengthen governance and make oversight more efficient. The question is whether reviews provide the insight needed to make better decisions and deliver good customer outcomes.