What should firms do about disengaged clients?

What happened?

In the second part of TCC’s ongoing advice series, Garry and David discuss how firms should manage clients who do not engage with recurring review offers. David confirms that the FCA expects immediate, proactive redress for the 2% of clients who were never invited to annual reviews.

For the roughly 15% of clients who did not respond or declined reviews, firms must conduct historical data audits going back to January 2018 to evaluate whether they paid for a service they did not receive.

Why does it matter?

Charging recurring fees to clients who are disengaged or uninvited violates Consumer Duty fair value rules. If reviews have been missed for multiple years, firms may need to initiate fee remediation or structured redress campaigns.

Furthermore, setting up a compliant disengagement process is complex. Firms cannot simply cut off a client; they must consider client vulnerability and outline a documented chase sequence before terminating the advisory agreement.

Who is affected?

This regulatory focus affects financial advice networks, wealth managers, and operations directors handling client fee structures and annual review cycles.

Key risks

• Unjustified Ongoing Fees: Continuing to collect advisory fees from clients who have not engaged in reviews for several years without intervention.
• Unmanaged Redress Liabilities: Failure to audit historical files back to 2018 and identify uninvited cohorts who are due fee refunds.
• Non-compliant Termination: Disengaging unresponsive clients without appropriate safeguards for vulnerable consumers or documented chase attempts.

Actions to take

1. Audit Data Back to 2018: Scan client files to identify individuals who paid for ongoing advice but did not receive a review.
2. Draft a Disengagement Policy: Create a structured policy outlining vulnerability assessments and a set number of client contact attempts before formal cutoff.
3. Execute Fee Remediation: Implement redress plans for uninvited client cohorts and chronic non-responders who received no value.

Wider implications

This highlights the FCA’s strict ‘no service, no fee’ stance. Advice firms must establish robust tracking to demonstrate active client contact and ensure fee structures correspond to delivered value.

Recommendations

Firms should deploy compliant, automated tracking systems to record every client invitation, response, and disengagement step, protecting themselves from regulatory exposure.