Ongoing servicing: FCA findings for firms

A couple of weeks on from the FCA’s commentary on ongoing servicing, what do their findings really mean?

The FCA’s commentary on ongoing servicing is something that we’ve all been talking about for a long time, and the findings have finally been released from the sample of advice firms reviewed.

The study found that in 83% of cases, ongoing reviews were carried out in line with service propositions; in 15% of cases clients had declined or not engaged with the request for information to conduct a review, while in 2% of cases firms had made no effort to conduct the review as part of the ongoing service the client was paying for.

Firms should take a sample of their own ongoing service clients to review and draw conclusions: are you meeting service standards, and if not, what are the next steps?

How firms can review their own ongoing servicing

When reviewing ongoing servicing, firms should take an original sample of ongoing service clients, ensuring it is representative of overall time periods, advisers, client type (accumulation/decumulation), service level, changes to systems or software and any acquisitions.

You should keep a record of the sample reviewed and your methodology used.

As part of your firm review, you should consider:

• Where was the service set out? Terms of Business, Client agreement, suitability reports?
• What did you agree to? Ongoing reviews? Frequency? Who was responsible for initiating them?
• Did you do what you said you would do? If you didn’t, why? Did the client decline a review, no response, no firm action?
• What was done as a result? Was the service agreement clear on the action taken for non-delivery and was action taken in line with this?

Ensure that your findings of the review are recorded and retained on file.

If you fall into the 83% of firms where you have met your service standards, and no redress is due, great!

Ensure that you keep a record of these findings and the work you have carried out on file and update your systems and controls document to reflect this.

What should firms do if redress is appropriate?

If you have deemed redress to be appropriate, are you comfortable with what the next steps are and how to calculate the redress due?

Questions to ask around redress include:

• Is it calculated on a pro-rata basis? A client may not have had a review, but what did the rest of your ongoing service cover e.g performance reviews, arranging transactions, other contact throughout the year?
• Do you consider the ongoing review to be the full service and therefore a full refund is due?
• Have you considered lost investment growth, interest or any consequential losses (change in circumstances that would have changed the recommendation)?

Ensure all these factors are considered and you have a consistent firm approach to calculating this redress going forwards.

It’s unlikely that PI will cover any redress due for lack of service, so ensure that you have sufficient capital held to cover the liability.

Next steps for firms reviewing ongoing servicing

After reviewing your ongoing servicing and drawing conclusions, the next steps are:

• Ensure that your service proposition, cost and frequency of reviews is clear and disclosed in the terms of business.
• Keep a clear scheduling review process and evidence it. Are there limitations within your back office in terms of providing this data? Have you identified a training need? Now is the time to fix this as this will be key MI data going forwards.
• Define a process to monitor the quality of your reviews and ensure consistency e.g. reassessing risk (attitude to risk, capacity for loss).
• Get a clear non-interaction policy in place. Do you do desk-based reviews? After 1 year? 2 years? Not deem them appropriate? How are you re-confirming client objectives? Disengage unresponsive clients? Record the rationale behind this policy.
• If you disengage – think about vulnerabilities and solutions that don’t require an adviser.
• If making a refund of fees ensure you keep a record of this.
• Good record keeping; are clients receiving written output?
• MI – ensure this is continually monitoring quality and delivery of reviews.

In addition to this, as part of Consumer Duty, firms should be consistently monitoring if clients with ongoing servicing  actually benefit from the service, or alternatively if they’re in the correct service level (for example, if a client has a lot of AUM in a top level of service but actually only has simple needs, their service level may need a review).

Suggestions for firms performing desk-based reviews

I also suggest firms consider their approach to desk-based reviews. Questions to ask around desk-based reviews include:

• How confident are you that the information you have is up to date?
• What if there was an update to client circumstances that you are unaware of and would immediately alter the recommendation; can you do a review and confidently confirm your recommendation is still suitable?
• How do you address these potential issues; do you work with the client to engage before you can do a review?
• Or do you deem the client not engaged and disengage with them?

If you do provide desk-based reviews, ensure that you clearly state that it is based on the information you have and anything you are unaware of may change your advice. If you do disengage with a client, consider any vulnerabilities clients have or this may cause.

What’s next from the FCA?

The FCA will be monitoring the work firms have done on carrying out their review of this ‘later in 2025’. Going forwards, the FCA will be working on these rules and has committed to policy work in 2025, and in 2026 will be doing data led supervision. Ensure that as a firm you’re not resting on your laurels and are proactive with your work on this.

This could be interesting given the current climate, the engagement of younger people who aren’t as engaged with meetings as other generations and want to rely on tech more; could we see scope for lighter touch services in the future?

For support with Consumer Duty, ongoing services or any other issues discussed in this article, contact Alanis Daniel at Verve using alanis.daniel@weareverve.co.uk.

Alanis Daniel

Compliance Consultant at Verve