Ongoing client reviews

Consumer Duty will require most firms to review their business model and, in particular the value of the services they offer.


The regulator clearly has a focus on the ongoing service provided to clients. There are longstanding rules that require firms to:

  • … consider whether the personal recommendation or any other related service is likely to be of value to the retail client when the total charges the retail client is likely to be required to pay are taken into account …
  • … be able to demonstrate, adequate policies and procedures in place to ensure that they understand the nature, features, including costs and risks of investment services and financial instruments selected for their clients and that they assess, while taking into account cost and complexity, whether equivalent investment services or financial instruments can meet their client’s profile …

These rules have been specifically related to the provision of ongoing service, for example in PS20-06:

“Our view is that many consumers would not benefit from ongoing advice as their circumstances are unlikely to change significantly from year to year. … Where ongoing advice is needed and would add value for the consumer, we expect firms to consider this as part of the recommendation, including the option of paying ongoing adviser charges directly rather than via the scheme (product).”

Which brings us neatly to today’s question!

Annual MOT?

Most firms operate some sort of preferred investment solution, for example model portfolios or DFM. A feature of most of these is the assumption that the client will take ongoing review service and pay an ongoing adviser charge. In light of Consumer Duty requirements, this raises two questions.

First, is the cost of the service commensurate with the value the client obtains from the service? Firms will have to undertake an appropriate value assessment to answer that question.

Second, is there any consideration of whether a particular client really needs ongoing service or is it a de facto default position that all clients have ongoing reviews? It is less obvious that this consideration happens hence the regulator’s consistent comment in relation to ongoing service.

Speaking at an adviser conference in February 2023, FCA director of consumer investments Therese Chambers told advisers that charges should reflect value to the customer and that this was one of the ‘topic areas [the FCA] will be looking at very keenly’.

She stated that the FCA’s 2020 review of the retail distribution review (RDR) found that firms placed 90% of new customers into ongoing advice and asked:

‘Do 90% of all customers actually need a financial MOT every 12 months?’

The no review option

So, firms may well have to give more attention to the option of clients not being recommended to take ongoing service and/or existing clients deciding to terminate ongoing service.

A major consideration in this respect is that the solutions suitable for clients who do not need or want ongoing service almost certainly have to be DIFFERENT to those suitable for clients for whom ongoing service is justified. Our investment process template makes this distinction but it seems at best to be an afterthought in many firms.

Given that the solutions may be different, the need or desirability for ongoing service needs to be assessed at suitability report stage or earlier.

Of course, some clients will have a need for ongoing advice regardless of the nature of the investment solution, for example, more complex tax affairs but, unless that applies, a no review/advice when you need it option may be more appropriate for many clients.

One firm asked ATEB how to handle an existing client who wanted to terminate ongoing service. We considered what the client had been recommended to invest in as this would have a bearing on the matter. We identified that the client was invested in the PruFund Cautious Fund.

Now, whatever the merits or otherwise of this particular fund, and it has had some setbacks recently, it undoubtedly has the ability to carry on regardless of whether the client has annual reviews or not. It seems unlikely that, having recommended this fund, there would be much imperative to change it, unless the client’s situation changed markedly.

As such, we were relaxed that there was little potential issue in the client terminating ongoing reviews and merely referring for advice if and when she needs it.

However …

… that would NOT be so simple had the adviser recommended other solutions, for example a DFM on an agent as client basis or a MPS on platform, especially if the platform was adviser only. Either of these would have placed the client in an investment limbo in the event of the client terminating ongoing service and /or the entire relationship with the adviser and that should be considered when selecting such solutions.

The situation is also not so simple when the client is in a drawdown plan and taking income. The basis of the withdrawals needs to be clear such that they continue without the need for adviser input. In the case we cite here, the client was taking regular income and with the PruFund, it will likely just be a case of selling sufficient units each month to raise the necessary cash. However, if it were a DFM or Model Portfolio there would need to be some basis such as units sold proportionately across the portfolio or some other defined basis.

Overall, there seems to be no problem for this client to move to an ad hoc servicing basis but it is fortuitous that the recommended solution was one with ‘shelf life’. Otherwise, the whole thing would have been more involved.


Important Note: ATEB news is intended to provide general information ONLY. The content, including any views expressed or guidance provided, does not replace the need to comply fully with FCA Rules and Guidance. Unless you have discussed news article content with ATEB, and specifically how it relates to your circumstances, then ATEB disclaims all liability and responsibility and actions arising from any reliance placed upon it. For the avoidance of doubt therefore, any reliance you place on such information without our consultation is at your own risk.

ATEB Compliance offers compliance and regulatory advice.

ATEB Suitability provides report writing software for the financial services market.

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About the Author

Technical Manager - Often referred to as the Oracle or the Sage, Alistair has a wealth of financial services experience. He is our go-to Technical Manager and enjoys nothing more than a complicated conundrum. Feel free to test his renowned knowledge by getting in touch.

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