FCA ongoing services review: Time to be concerned?

Unless you have been on a prolonged holiday and have turned off your phone for the duration (a tempting thought), you will be aware the Financial Conduct Authority has been very proactive when it comes to ongoing services, as part of Consumer Duty.

This has so far resulted in St James’s Place setting aside £426m and Quilter being subject to a section 166 skilled persons review.

This begs the question: how many of the 20 firms the FCA wrote to in February requesting information about their delivery of ongoing services may also come under fire?

Against this backdrop, all firms should be considering whether the delivery of their ongoing service propositions and processes are fit for purpose.

It is also now uppermost in the minds of acquirers, both in relation to contemplated acquisitions and businesses they have already acquired.

The starting point is to read what the FCA said in its letter to the largest advice firms. Its survey asks:

• Whether firms have assessed their ongoing services in response to the introduction of the Consumer Duty and whether they have made any changes as a result.
• For detailed data on the number of clients due a review of the ongoing suitability of the advice as part of the service, how many received that review and how many paid for ongoing advice but whose fee was refunded as the suitability review did not happen.

The data requested should cover the last six to seven years. This is likely to create a challenge for firms involved in the review, as some will be active acquirers who have bought firms with differing back-office systems, while others will have merged legacy systems together during this period.

This FCA request is good example – if another was needed – of its increasingly proactive and data-led approach when it comes to its oversight of the Consumer Duty, let alone its approach to supervision more generally.

The old adage, “You don’t get a second chance to make a good first impression” is one to heed

Once the results have been analysed, we will no doubt see them provided in considerable detail, and there may be additional data-reporting requirements all firms will need to adhere to.

So, what should other regulated firms be doing? The trite answer is that they should have acted already in anticipation of the 31 July 2023 Consumer Duty implementation date – one aspect of which is to have looked at target markets and conduct a fair value assessment.

If your firm has already done this work, there are other actions to consider:

• Review client agreements to confirm the services you claim to provide are being provided – and can actually be delivered. (Some agreements have services which rely on third parties, so these third-party agreements require review too.)
• Review client agreements to ensure the services are appropriately costed – i.e. that the costs can be justified and that, as far as possible, cross-subsidy is avoided.
• Ensure that, if asked by the FCA, you can provide the same detailed data the larger firms have been asked to.
• Consider how you should calculate client recompense for any reviews not delivered. However, before making any payments, expert compliance input should be obtained to ensure your process stands up to any subsequent scrutiny.

Finally, for those firms contemplating a sale, ensuring your ongoing review services data is robust and complete is paramount.

The old adage, “You don’t get a second chance to make a good first impression” is one to heed.