Wealth managers signal the FCA’s ongoing advice review presented better findings than they expected – here’s why.
The FCA recently reported that 83% of suitability reviews were conducted as required, according to data it collated for its ongoing advice review. Our sister compliance consultancy company, TCC, has sought the opinion of wealth managers on these results:
72% stated that it was a better outcome than they expected
26% indicated that it was in the approximate region they expected
2% thought it was worse than they expected
Although initially viewed as a positive result for the sector, the regulator’s findings should be taken with caution, as they are based on self-reported information rather than a qualitative evaluation of individual client reviews. Some of the work TCC’s experts have undertaken in this area highlighted cause for concern about the reliance on adviser attestation in particular. The quality and consistency of what those responding firms have done is highly likely to differ markedly, so breathing a sigh of relief might be premature.
Evidence to categorise clients
The regulator has made it 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:
38% declaring they have all the evidence to distinguish which clients received their review
58% attested to having just some of the evidence
4% reported having none at all
The all-important question is what firms should be doing now to ensure that they have the evidence in place that the FCA will now expect 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:
62% confirmed they had the relevant fact-find and evidential report backed up in their practise management system (PMS)
23% reported a checkmark in the PMS to indicate that the review had been received by the client
15% responded that their evidence was in a different format
The FCA’s review categorised ongoing advice clients into three areas and the necessary evidence required for each of these groups 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 utilisation of management information (MI). In these instances, senior managers are required to effectively demonstrate their compliance with the senior managers and certificate regime (SMCR) 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 the backwards-looking piece of work (back to 20218) but also to integrate sustainable practises for the long term. This includes closely examining your fair value assessments, ensuring that MI is reviewed regularly with appropriate actions taken, and implementing a thorough disengagement strategy for clients who meet such requirements.
It’s vital to ensure that as a firm, you’re confident that the client data you have is robust enough to mitigate the need for a past business review in the future. The clarity of chronology and frequency of client contact, or attempted client contact, along with notes on the medium used for this contact, are all vital components to achieving this successfully.
Here is where Recordsure AI comes to play. Firms can enhance their suitability reviews by integrating AI into their workflow. Recordsure AI automates document checks, notifying you only when evidence is missing so advisers can intervene. Preparing for the future, wealth managers can use Recordsure AI to record, store and analyse all client interactions and create a substantial, authoritative evidence path.
Objective expertise
In today’s ever-evolving landscape, tapping into independent expertise is a savvy move for forward-thinking firms. It’s crucial for ongoing advisory providers to showcase their commitment by consistently conducting annual client reviews backed by thorough documentation. Firms should consider getting impartial advice and support from compliance specialists like TCC – to get insightful analysis and strategic guidance, cost-effective outsourcing solutions for projects and agile resourcing to swiftly expand your team with top interim resource.
