FCA ongoing advice review presents better than expected findings

The FCA recently reported that 83% of suitability reviews were conducted as required, according to data it collated for its ongoing advice review. TCC, Recordsure’s sister compliance consultancy company, sought the opinion of wealth managers on these results.

The poll found that 72% stated the result was better than expected, 26% indicated that it was in the approximate region they expected, and 2% thought it was worse than expected.

Although initially viewed as a positive result for the sector, the regulator’s findings should be treated with caution because they are based on self-reported information rather than a qualitative evaluation of individual client reviews. Work undertaken by TCC’s experts has highlighted concerns about reliance on adviser attestation in particular. The quality and consistency of what responding firms have done is likely to differ markedly, so relief may be premature.

Evidence to categorise clients

The regulator has made clear that it will revisit this topic later in the year, with the expectation that firms have evidence on file to substantiate the thoroughness of their suitability reviews.

TCC polled wealth managers on this topic. The results showed that 38% declared they have all the evidence to distinguish which clients received their review, 58% attested to having just some of the evidence, and 4% reported having none at all.

The important question is what firms should do now to ensure they have the evidence in place that the FCA expects to see. TCC’s regulatory experts advise a twofold approach: a backwards-looking review exercise and a forward-looking plan.

Reflect on the past, secure the future

TCC’s poll also asked wealth managers about the quality of evidence they had on file. It found that 62% confirmed they had the relevant fact-find and evidential report backed up in their practice management system, 23% reported a checkmark in the system to indicate that the review had been received by the client, and 15% responded that their evidence was in a different format.

The FCA’s review categorised ongoing advice clients into three areas, and the evidence required for each group would vary.

• #1 Clients that received their review as anticipated
• #2 Clients that did not engage
• #3 Clients that weren’t contacted for their review

Wealth managers should be reviewing client interactions dating back to 2018.

The ripple effect

TCC’s experts have observed the ripple effect and expect it to be extensive, particularly in the production and use of management information. Senior managers need to demonstrate compliance with the senior managers and certification regime alongside their board duties, providing sufficient evidence to confirm that these matters have been thoroughly considered.

Proportional expectation

Firms will be expected not only to carry out backwards-looking work back to 2018, but also to integrate sustainable practices for the long term. This includes closely examining fair value assessments, ensuring management information is reviewed regularly with appropriate actions taken, and implementing a thorough disengagement strategy for clients who meet such requirements.

Firms need confidence that client data is strong enough to mitigate the need for a past business review in the future. Clarity of chronology and frequency of client contact, or attempted client contact, along with notes on the medium used, are vital components.

Recordsure technology can enhance suitability reviews by integrating AI into workflow. It automates document checks, notifying firms only when evidence is missing so advisers can intervene. Wealth managers can use Recordsure technology to record, store and analyse client interactions and create an authoritative evidence path.

Objective expertise

Independent expertise can help ongoing advice providers show commitment by conducting annual client reviews backed by thorough documentation. Firms should consider impartial advice and support from compliance specialists such as TCC to obtain analysis, strategic guidance, cost-effective outsourcing solutions for projects and agile resourcing to expand teams with interim resource.