Part 1: FCA’s ongoing advice services review: the scope

TCC held a webinar, ‘What risks remain for firms following the FCA’s ongoing advice review findings?’, to share its house view on the regulator’s communication for wealth managers. Recordsure’s Chief Product and Chief Commercial Officer, Garry Evans, was joined by TCC regulatory experts Gary Maude and David Boyhan.

The first part covered the parameters of the FCA’s ongoing advice review. Garry introduced the session as a discussion of the results of the ongoing service advice review completed by the FCA and the implications for the wealth management sector.

Garry Evans

Garry explained that the webinar would give TCC’s view on what the FCA letter means, what wealth managers need to do in BAU checking of ongoing advice services, and whether any past business review is needed. He used “past business review” without connotations of Section166 or major redress programmes, describing it simply as a review of what happened in the past.

He said many wealth management organisations reacted to the FCA’s letter with relief, and some contacts had shifted from allocating a significant provision and setting up projects to changing processes and reviewing historic books, almost to doing nothing.

Garry cautioned that although TCC believes the FCA indicated the redress population may be small, the letter did not remove the expectation to do a past business review. The FCA’s survey of the top 22 wealth management firms concluded that only 2% of clients had not been offered an annual review, which Garry described as the true redress population.

He also noted that a further 15% of clients either declined to review or were not engaged with offers of a review, suggesting they may be in the wrong service but are less likely to require redress. The vast majority, 83% of clients, had completed an annual review process.

Garry framed the purpose as covering both BAU checking and what, if anything, needs to happen in terms of a past business review. He said firms could replace that term with a more comfortable one, but should still consider the review of what has happened in the past.

He said the FCA’s letter changed some firms’ servicing plans, moving them away from provision and historic-book projects. TCC’s view, however, was that relief should not be read as removing the burden of expectation.

He welcomed attendees to the TCC webinar and said the purpose was to provide experienced feedback on the FCA results for the wealth management sector. He noted that David Boyhan and Gary Maude had many years of relevant consulting and practitioner experience across financial services sectors.

Gary Maude

Gary Maude said TCC viewed the survey outcome as positive, while recognising that compliance and risk professionals may have healthy scepticism about the political climate or implicit messages in the FCA’s narrative.

He reminded attendees that he and David Boyhan have practitioner experience: Gary has been a Compliance Risk Director and CRO at several firms, while David is an ex-regulator who has supervised over 200 firms and remains in contact with FCA colleagues with first-hand knowledge of relevant risks.

Gary focused on the FCA’s narrative that firms need to evidence that they have delivered all services required by contracts or by FCA rules. He said the word “evidence” brings contract law, Consumer Duty fair value and other considerations into scope.

He also highlighted the FCA’s statement that firms should consider whether it is appropriate to proactively contact customers to assess if any harm has been caused by identified problems or failings. TCC could not cover every risk in the webinar and was holding a two-hour roundtable in London with DAC to explore legal and contractual points.

Gary noted that the FCA outcome was based heavily on what firms told it and was a black-and-white exercise: whether firms had or had not made contact with customers. That did not mean the work had been done well. He was concerned about reliance on adviser attestation feeding management information without exploring the quality of client engagement.

He said any review needs a long-term view, going back probably to 2018. In summary, he described the FCA outcome as qualitative, based on a tick-box mentality of whether something had been done, and warned that the quality and consistency of responding firms’ work would differ markedly.

Gary said the FCA update should be read almost verbatim: firms need to know whether they can evidence that they delivered all services required by contract and FCA rules. He described that as a holistic narrative and warned that contract law, Consumer Duty fair value and customer harm all come into the equation.

He also said different stakeholders would need to look at the risks, and that the quality aspect of client engagements could not be covered only by black-and-white data about contact. The risk lay in the difference between saying something happened and showing it was done well.

Gary said he wanted to reassure compliance and risk professionals that the panel had direct experience to inform the discussion. He also reminded attendees that the next stage would include consideration of whether firms should contact customers proactively where identified problems or failings may have caused harm.

He said some people might think the issue had not gone away, despite the positive survey result. The point for firms was not only whether contact happened, but whether they could speak to the standard and quality of what happened.