Wealth managers signal the FCA’s ongoing advice review presented better findings than they expected

What happened?

Although the FCA’s initial review findings were viewed by some as a positive result for the sector, TCC cautions that they are based on self-reported information rather than a qualitative evaluation of individual client reviews. TCC’s own work in this area has highlighted concerns about reliance on adviser attestation, since the quality and consistency of firms’ responses varies markedly.

TCC polled wealth managers on the evidence they hold: 38% said they have all the evidence needed to identify which clients received their review, 58% said they have only some of that evidence, and 4% said they have none at all.

Why does it matter?

The FCA has indicated it will revisit this topic later in the year, expecting firms to have evidence on file to substantiate the thoroughness of their suitability reviews. TCC’s poll also found that 62% of wealth managers had the relevant fact-find and evidential report saved in their practice management system, 23% had only a checkmark to indicate a review was received, and 15% held evidence in a different format.

The FCA’s review categorises ongoing advice clients into three groups: those who received their review as anticipated, those who did not engage, and those who were not contacted at all, the last of whom are due redress.

Who is affected?

Wealth management firms providing ongoing advice services, and the compliance, risk and advice functions responsible for maintaining evidence of client reviews dating back to 2018.

Key risks

• Relying on adviser attestation without independently verifying the quality and consistency of reviews.
• Holding evidence in inconsistent formats, such as a checkmark rather than a full fact-find or report.
• Being unable to categorise clients correctly into the FCA’s three review outcome groups.
• Weak management information that does not allow senior managers to evidence oversight under SM&CR.

Actions to take

1. For clients who received their review, keep up-to-date know-your-customer information and a report letter confirming ongoing suitability.
2. For clients who did not engage, keep documented evidence, such as an invitation email, that they were given the opportunity to take part.
3. Categorise client interactions dating back to 2018 into the three review outcome groups annually, and use this analysis to determine the right action for each client.
4. Review management information regularly, examine root causes of unusually favourable outcomes, and take action based on findings across advisers, branches and supervisors.

Wider implications

Senior managers are expected to demonstrate their compliance with the Senior Managers and Certification Regime alongside their board duties, providing sufficient evidence that these matters have been thoroughly considered. Firms will also need to closely examine fair value assessments and implement a thorough disengagement strategy for clients who meet the relevant criteria.

Recommendations

TCC recommends a twofold approach: a backwards-looking piece of work to establish the evidence firms already hold, and a forward-looking plan to ensure reviews are documented consistently going forward. Independent expertise can help firms demonstrate their commitment to conducting annual client reviews backed by thorough documentation.