Ongoing client reviews – appropriate or not?

FT Adviser published an article on 15 February under the headline “Advisers struggle to get savers to come for pension reviews”. We read this with interest and not a little concern.


The article reported that one of the speakers at a recent conference stated that one of the greatest challenges faced by her advice firm was getting clients to engage and agree to regular reviews. “We invite them for review every year but very few take us up on it”

At least one other firm empathised. “It’s generally more difficult for someone who’s 15/20 plus years away from their retirement age to be engaged with their pension and it may require a lighter touch service.”

Inevitably, there were those who did not agree and suggested that if clients are not engaging it must be because the adviser is “… not making the subject interesting enough …” or perhaps that the adviser has “… just a lack of personality…”. It is notable that these comments are totally subjective opinions based on no evidence.

Nonetheless, whatever the reason, there are some fundamental issues raised by clients not engaging with ongoing reviews. We examine some of these below.

Different strokes for different folks

Those clients that do clearly have a need for regular contact with an adviser should be encouraged to engage with the firm’s appropriate service level. Whether every client recognises that need or how enthused they are to meet regularly with an adviser is another matter entirely and this would be where the skills of the adviser would come into play in terms of persuading the client of the value of ongoing advice.

How necessary?

However, the need for ongoing advice should arise from the client’s situation and NOT merely because the solution originally recommended does not have what might be called ‘shelf life’! Firms commonly recommend ongoing reviews so that the client’s changing circumstances can be considered or to rebalance the portfolio.

The FCA’s views in this respect should be noted::

“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”  (PS20-06)

And this extract from FG21-03 further confirms where the FCA is on this topic:

“We would expect to see, among other things, consideration of:

  • whether your client needs a broad range of complex funds that require ongoing rebalancing, given their risk profile, and knowledge and experience of investing
  • the proposed product charges … and how the level of charges could affect the income your client will ultimately receive
  • whether ongoing advice is necessary, given these points, or whether the client is likely to be better off taking ad hoc advice when needed”

In relation to the need for rebalance, a multi-asset fund can offer this built in and firms are increasingly using DIM portfolios where any required rebalancing and asset changes are included as part of the service.

Accordingly, those clients with no imminent or obvious advice needs, might well be better served by an alternative simpler solution, and that would include solutions with shelf life. It is worth remembering that COBS 9A.2.19 specifically requires firms to:

“… assess, while taking into account cost and complexity, whether equivalent investment services or financial instruments can meet their client’s profile”

A former senior FCA specialist summarised this rule as follows:

“… if you are recommending solutions that are more expensive or more complex than something else that meets the client’s needs, then this is unsuitable …”

Now, once a client is within say a year or two of retirement, the need for advice becomes more imminent and more obvious. And one size fits all generic lifestyle fund strategies are not really proving to be the panacea that they promised. A quick online search throws up lots of well articulated criticism of why these strategies are unlikely to be right for most clients. But the question remains of why the advice for a bog standard unsophisticated client with 15+ years to retirement should be anything other than a low cost, probably largely passive fund based solution.

How committed?

We do see well constructed review packages designed specifically with client need and objectives in mind, rather than clients falling into a pre-defined category.

However, that at least some firms are struggling to get clients to take a review begs the question of how committedly or proactively the client actually signed up for annual reviews and ongoing adviser charges in the first place. Were ongoing reviews driven by a client need or by the adviser’s use of a preferred investment solution that assumed or required that ongoing reviews would apply?

One of the common reasons stated in suitability reports for recommending a pension switch is because the client ‘wanted to have ongoing advice’ yet there is no indication of this in any of the fact find notes.

So, the client need for ongoing reviews appears to be less than universal, but we suspect that most clients do want to be regularly appraised of how their investments are performing. The adviser of 20 or 30 years ago had no choice but to sweat for hours confirming unit holdings with each provider (especially where withdrawals or unit divisions might have occurred), checking the latest unit price  and creating a manual table or spreadsheet to work out the current value of the portfolio (or delegating this tedious task to an administrator – paraplanners were thin on the ground back then). In this technological age, none of that is necessary, online valuations are instantly available 24/7 and the client can access the information at their convenience. If a client can’t do this, then he or she is on the wrong platform!

Terminating ongoing reviews

Let’s presume that, having considering all the aspects highlighted above, you are confident that every client that is currently signed up for ongoing reviews should be. What do you do with the ‘non-responders’ or the clients whose response is always something like “I am happy with everything for the moment, let’s leave it until next year!”?

In these cases, the immediate problem is how you can compliantly implement the required periodic assessment of continued suitability. This must be provided in writing at least annually and you cannot simply assume that the client’s situation, objectives and risk profile have not changed. You need some mechanism for updating or confirming those. This is doable with the ‘happy for the moment’ clients but impossible for the non-responders.

The appropriate response is to have a documented policy that defines how many reviews are allowed to be missed before you confirm to the client that the ongoing service is being terminated and ongoing adviser charges (including any trail commission, especially if previously novated from another firm) will cease. One missed review is arguably OK – provided you can do the periodic review referred to above. Two missed reviews is probably the point at which it is prudent to terminate the service.

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.

Our View

Many firms have long term relationships with clients where ongoing reviews are both appropriate and provide value. But not all clients need regular reviews, or only need those because of the nature of the investment strategy recommended. Solutions should genuinely match the client need and should not be a default destination for every client. If your PROD process does not recognise and address this distinction, the process should be reconfigured.

Action Required By You

Consider whether each client has a need for regular ongoing advice or whether it would be sufficient to provide ad hoc advice when required.
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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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