Ongoing Advice: Time for Action Not Worry


Ongoing Advice: Time for Action Not Worry

Ongoing advice is the cornerstone of effective financial plans and client relationships. It’s a key contributor to referrals, complaint statistics, profitability, not to mention the valuation of a firm.

Why the current hysteria?

It’s been a busy few weeks in the financial services press as firm’s annual results have once again brought ongoing advice into focus. From St. James’s Place announcing the provision of over £400m for potential refunds, to Quilters confirming ongoing investigations could result in remedial costs, ongoing advice is becoming costly for firms. Both companies saw their values fall on the back of their respective announcements.

The expectation from the FCA has always been that where a firm is charging for a service, that they need to deliver it (and no doubt they would reference the thematic review of Adviser charging and services in 2014), so why the flurry of activity now?

There’s no doubt that Consumer Duty brings additional scrutiny and gives the regulator more teeth to target firms. Through its Implementation of Consumer Duty review, the FCA has already identified charging costs for a service that clients are not benefitting from as an “area of approvement”. There’s also a growing army of claims management firms homing in on advice fee refunds (with one firm going as far as suggesting they’re reclaiming millions of pounds each month for clients). Just last week, the FCA’s Retirement income advice thematic review (TR24/1) confirmed “Firms should not charge customers for services that are not delivered. In the data survey, some firms indicated that some of their customers had paid for but did not receive an annual/ongoing review. Not all firms were able to give this data as it was either not measured or not recorded centrally.”

It’s an area clearly in the spotlight and you start to get a sense of why firms, from sole-trader IFAs to the largest networks, are increasing their focus on the subject.

What is making firms worry?

Typically, firms who are worried will have fallen into one of two traps. They’ve either delivered the ongoing advice, but failed to maintain accurate and detailed records, meaning they aren’t able to evidence it, or more simply, they’ve not provided the ongoing advice they’ve been charging for. And let’s be clear, it doesn’t matter whether that was due to poor oversight, client inertia, forgetfulness, conflicting scheduling or any other defence a firm can come up with, the fact of the matter is they’ve charged for a service and cannot evidence providing it.

What does good ongoing advice look like?

Recently we’ve received queries from firms concerned to know whether their approach to ongoing advice is right. While the starting point of good is obvious…make sure you are actually delivering an ongoing advice service, that isn’t everything.

For us, there are four key questions firms should reflect on:

  • Do you have an efficient process to deliver your ongoing advice proposition?
  • Do you have appropriate MI, advice guidelines and oversight which allows you to monitor ongoing advice and good outcomes being delivered?
  • Do you have relevant controls in place to ensure clients aren’t paying for a service they aren’t receiving?
  • Are you able to articulate (with evidence) what a client can expect and what was delivered from the ongoing advice you have charged for?

What should you do next if you are now worried too?

Well, stop worrying as that isn’t going to change anything! The first thing to do is to complete an honest assessment of your situation. Take the four questions and analyse your firm’s current position – consider what you can prove and not what you think.

If this analysis highlights gaps or the need for improvements, then you’ll need an action plan to get you on a stronger footing and we can help you with that. Adeptli has a proven track record of working with firms to:

  • Complete a back book review of a firm’s ongoing advice proposition to help understand their risk exposure in this area
  • Create ongoing advice guidance and case checking processes to enable firms to demonstrate oversight of the quality of ongoing advice
  • Review and redesign internal processes to improve MI, oversight and automation of the documentation required to complete and evidence ongoing reviews

It just sounds like extra work?

The signals from the FCA mean we believe firms will face an increasing burden to justify fees for ongoing advice. This inevitably means the vast majority of firms are now going to find themselves taking extra steps to demonstrate not only the value of their proposition, but that they’ve also got appropriate systems and controls in place to monitor it too.

These extra steps will manifest differently for all firms but will ultimately lead to more work. As we all know, more work means reduced profitability for any firm – either because it leads to higher costs (through additional staff/outsourcing/technology to complete the work) or reduced income (due to a reduction in the number of clients who can be evidenced as being effectively serviced). And remember, profitability could be further impacted by the potential exposure to having to refund historic fees or worse, any financial penalties from the FCA.

Designing processes in a scalable and repeatable fashion will therefore be a vital part of how firms adapt to minimise the impact on their bottom line. Here at Adeptli we are geared up to help you with that, so book in a free initial conversation to find out how.

If the FCA and other firms in the industry are taking this seriously, then it is important you do too.

Next Up: If you haven’t read it yet, check out our article Ongoing Advice – Have You Reached Your Destination?


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