Review. It’s a simple word, but depending upon who you speak to, it can have several meanings.

There are several definitions of the word ‘review’. In verb form, the Cambridge Dictionary cites review as: to think or talk about something again, in order to make changes to it or to make a decision about it. Seems straightforward enough doesn’t it? Not when it comes to ‘reviews’ provided by advice firms as part of their ongoing service propositions it doesn’t.

Speaking to an esteemed industry (non-ATEB) contact recently, it became clear that the firms she deals with seem to have very different interpretations of what constitutes a review, and based on our experience, we think she has a point. There seem to be a lot.

So what constitutes a ‘review’ in your firm? Is it…

• A regular (at least annually) discussion with the client (face-to-face, phone, Teams, or whatever is their preferred medium) where they are provided with an update on their investments/progress against their goals, KYC is reviewed/updated, client objectives are revisited/reaffirmed, ATR is checked/revised if necessary, cashflow forecasts are tweaked to reflect any changes and records are updated accordingly. Where there are no changes required ongoing suitability is confirmed in a brief report and the next review date is scheduled in the diary. If changes are required these are made and revised recommendations are provided as a new advice scenario.
• All of the above plus a litany of fund factsheets, market commentary, asset allocation charts, performance tables and much else besides in some cases. Basically, enough to keep an academic fully occupied for a weekend.
• Some clients get all of the above, whereas some (who pay less/have less AUA) maybe don’t. They get…
• A valuation, a cup of tea and a biccie and an offer on the lines of: “Let us know if anything changes and we’ll provide some advice”.

These approaches all differ of course, but what remains the same is that depending on the firm’s interpretation, they all constitute ‘a review’.

Trouble is, virtually every client has signed up for the firm’s ‘Ongoing Review Service’, for which they pay ongoing advice charges, but how many were told what to expect within a review? Plenty will have been told, “Our advice isn’t a one-off, it’s important that we review things to make sure they remain on track. We should meet up at least annually to do so”. So if it’s just a cuppa and a valuation where exactly does it meet the ‘service’ definition? There are a few exceptions, but this is pretty much what we see most of the time. Some firms seem to think that they can effectively do the thick end of b*****r all and still receive an ongoing revenue. Would you pay for that? Thought not.

So in terms of the definition of ‘review’ quoted above, the think or talk about bits are done (talk is cheap apparently), but what about the changes or decisions aspects? Again, it depends on the firm’s interpretation.

As you’d expect, there are rules

Be honest, you knew that this was coming didn’t you?

We could blather on about Consumer Duty this or that, but the rules have been around since well before 31 July 2023, and arrived in more definitive format with MiFID II, which landed on 3 January 2018 (is it really six years since that came in?). The rules don’t capture all products, but the spirit of them probably does. So what rules apply?

Well, for starters there’s COBS 9A.3.8 which states that:

Investments firms providing a periodic assessment of the suitability of the recommendations shall disclose all of the following:

1. the frequency and extent of the periodic suitability assessment and where relevant, the conditions that trigger that assessment;
2. the extent to which the information previously collected will be subject to reassessment; and
3. the way in which an updated recommendation will be communicated to the client.

COBS 9A.3.9 follows this up with:

Investment firms providing a periodic suitability assessment shall review, in order to enhance the service, the suitability of the recommendations given at least annually. The frequency of this assessment shall be increased depending on the risk profile of the client and the type of financial instruments recommended.

Anyone spot that for some clients one review per annum isn’t sufficient? In some cases, one review per annum appears to be an aspiration!

Call me picky, but how can a review not assess the suitability of what has already been recommended? Some firms think that this isn’t required, but if it isn’t, why is client signed up for the ongoing review service and if the client pays, what exactly are you doing for the OAC? Conversely, it’s amazing how many clients need a ‘review’ of their pensions and investments that aren’t (currently) invested in the firm’s CIP and that the firm doesn’t receive OAC for. No prizes for guessing what happens there!

Despite this, a lot of firms seem to have interpreted reviews as not requiring an assessment of suitability. So if they aren’t an assessment of suitability what are they? And if the client is paying for this what do they get for the money? A four figure sum for a computer generated valuation that they already receive from product providers? You’re having a giraffe mate.

OK, your client agreement might say that the client gets pretty much naff all, but did the client really read it before they signed? Try explaining how taking a shed load of cash off a client’s investments and doing practically nowt translates into fair value. The FCA, despite howls of derision that they’re a price regulator (they do appear to be gravitating towards this though), isn’t (currently) really interested in specifically what you charge, but they’re probably very interested in what you actually do.

Assuming reviews do require an assessment of suitability, what then?

Well, this is where the problem seems to lie in many instances. An assessment of suitability requires the issue of a suitability report (see COBS 9.4.1R).

Disagree? Perhaps COBS 9A.3.2 and 3 will convince you otherwise:

COBS 9A.3.2 states that: When providing investment advice to a retail client, a firm must, before the transaction is concluded, provide the client with a  a suitability report in a durable medium, specifying the advice given and how that advice meets the preferences, objectives and other characteristics of the client. 

And COBS 9.3.3 reiterates this with:

When providing investment advice, investment firms shall provide a report to the retail client that includes an outline of the advice given and how the recommendation provided is suitable for the retail client, including how it meets the client’s objectives and personal circumstances with reference to the investment term required, client’s knowledge and experience and client’s attitude to risk and capacity for loss.

Investment firms shall draw clients’ attention to and shall include in the suitability report information on whether the recommended services or instruments are likely to require the retail client to seek a periodic review of their arrangements.

But the good news (and what firms seem to be unaware of) is that…

COBS 9A.3.3 adds: Where an investment firm provides a service that involves periodic suitability assessments and reports, the subsequent reports after the initial service is established may only cover changes in the services or instruments involved and/or the circumstances of the client and may not need to repeat all the details of the first report. Whoa! No 30 page monster required then and where there are no changes you only need a brief letter confirming ongoing suitability. If KYC, ATR, etc. are up to date it’s not too onerous after all.

Now that COBS-fest is out of the way, what next?

Well, they’re the rules, and breach a rule and it’s off to the naughty step, but there are also FCA Principles involved here – Principles 6 (TCF) and 12 (Good Client Outcomes) for instance. Breach these and that’s when phrases like ‘past business review’ and ‘skilled persons report’ enter the equation. You do NOT want to hear these, and we can provide the evidence to prove it.