Introduction
The FCA recently requested data from 22 of the largest financial advice firms to review, with a focus on the suitability review process delivered by the sector. At the centre of this review were concerns held by the FCA that financial advisers were charging for but not delivering the services they offered, such as arranging transactions or managing relationships between retail clients and the discretionary investment manager.
The Findings
Through the review process, it was found that advisory firms delivered around 83% of suitability reviews to their clients, with a further 15% where the client refused or did not respond to the firm’s requests to undertake a suitability review. Encouragingly, it was found that in fewer than 2% of cases, firms reported not making any effort to deliver or request a suitability review for their clients.
Simon Walls, Interim Executive Director of Markets at the FCA, commented on the statistical outputs of the review. He stated that “… in the vast majority of cases we looked at, firms delivered ongoing advice for their customers…” but also flagged that “… in a small number of cases, they (firms) haven’t attempted to provide the services they offered and customers are paying for…” This shows that, in general, the industry is providing services in line with FCA expectations, but there is still room for improvement.
These review processes are vital for providing appropriate services for individuals and maintaining clear contact with customers. They are also a great tool for demonstrating Consumer Duty compliance, with these encouraging statistics providing an indication that the Duty is being embedded into firms’ frameworks.
Additionally, firms should take note of the FCA Handbook requirements under COBS 9A (Assessing Suitability) and PRIN 2A (Consumer Duty) to ensure they align with regulatory expectations.
Moving Forward
Despite these findings, firms cannot rest on their laurels. The FCA is asking all advice firms to consider whether they meet all their regulatory requirements and contractual obligations to their clients. If it is identified that good outcomes are not being produced for clients, then appropriate remedial action will need to be implemented. Firms must ensure that they meet expectations on an ongoing basis and do not see this positive feedback as a reason to stop improving their frameworks, review processes, and client outcomes.
How Can Complyport Help?
Complyport can help your firm understand the FCA’s regulatory expectations and implement frameworks that align with these expectations. More specifically, we can support your firm by providing:
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- Suitability Framework Review – A detailed assessment of your firm’s framework, identifying areas for enhancement to meet FCA expectations and support your clients.
- Framework Implementation – Assistance with updating your framework through documentation support, training, or remedial action.
- Suitability Review – Reviewing advice provided to clients and assessments of suitability reviews to ensure alignment with regulatory expectations.
For further guidance, contact Complyport today to speak with one of our Subject Matter Experts and ensure your firm remains compliant.
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