Two key FCA reviews and tips for effective client communications

Next month the FCA will publish the findings and next steps from their Vulnerability Review. We've been invited to the in-person event and will share our insights following the event.

Finally, our recent webinar on clear and effective client communications generated over 600 registrations and included a variety of good practice ideas. You can watch the recording here.

The Vulnerability Review: Findings and Next Steps

This is the second key review from the regulator on how the market is performing against its obligations to recognise, support and record client vulnerability.

We're attending the FCA's in-person event on 11 March and will provide an update as soon as possible after the event. 

Ongoing financial advice services

On 24 February, the FCA published the findings from their review into whether financial advisers are delivering the ongoing advice services that consumers have paid for.

They asked 22 of the largest advice firms to provide information and data on their delivery of ongoing advice covering the previous seven years and the review focused on delivery of suitability reviews.

The review’s findings are summarised below:

Vast majority of ongoing suitability reviews delivered.

• Suitability reviews took place in 83% of cases.
• In 15% of cases, clients either declined the review or didn’t respond to the firm’s offer of a review.
• In fewer than 2% cases, firms reported they had not attempted to conduct a review.

Examples of good practice

• Client agreements and relevant consumer communications clearly set out the nature and timing of the ongoing service.
• Effective systems and resources ensure suitability reviews are scheduled and offered as agreed.
• Policies to stop collecting fees where a client hasn’t engaged with the service for a period of time.
• Appropriate record-keeping to help evidence delivery of services provided.
• Suitability reviews included:
  • Reviewing/updating clients’ circumstances, objectives, attitude to risk and capacity for loss.
  • Reviewing and recording risk profiles, charges and performance of existing investments to determine whether still suitable or alternative recommendations required.
  • Client communications recorded the outcome of a review being a personal recommendation. 

Examples of poor practice

• Client contracts without a clear description of the services enabling clients to understand what will be delivered throughout the relationship.
• Ineffective processes, controls and monitoring to ensure services were delivered in line with contractual obligations, and that advice provided met regulatory requirements.
• Insufficient management information to give senior management adequate oversight of the services.
• Inadequate record-keeping meant firms could not evidence delivery of their services.

Next steps for firms

The FCA is asking all firms to review the findings and consider if they have met all their regulatory and contractual obligations. If not, it expects firms to take appropriate steps to remedy the situation.

The FCA has also committed to undertake a review of the regulatory rules to ensure they reflect both consumer and sector evolution over recent years, including the role of technology, and will engage with the sector in 2025 on this review – we will aim to keep you updated and engaged.

Ensuring your communications meet consumer understanding requirements

Many of the FCA's good and poor practice examples reinforce the need for clear and effective consumer communications. Our recent webinar was packed with useful ideas to help firms ensure their communications achieve this.

Attracting almost 300 attendees, this session generated a lively, informative and engaging conversation with a variety of practical tips and ideas. View the recording here.

The Alliance is in regular contact with the FCA in most key areas and is a conduit for two-way communication with members – please let us know if there are issues or topics you would like us to raise by emailing info@consumerduty.org.

If you’re not an Alliance member, it’s quick, easy and free to join as an individual, a firm or both – visit this page to see how.

To be recognised as a true profession - united as an Alliance we evolve!

Very best wishes,

Keith Richards, CEO, Consumer Duty Alliance and Chairman, Financial Vulnerability Taskforce

Given the FCA’s requirements to help consumers make informed decisions, how can firms ensure their communications are effective and clear? 

In this Alliance Forum, Michael Lawrence and his expert guests discuss practical steps to help firms develop and embed a robust consumer understanding framework. Topics included:

• What the regulator expects of firms.
• Key insights from behavioural science and what they tell us about consumer behaviour.
• Principles for clear communications.
• Principles for effective verbal and video communications.
• Communicating complex concepts during advised journeys.

Watch the recording here.

Evidencing consumer understanding of financial concepts is a key requirement of Consumer Duty, and a new resource can help you achieve that.

Award-winning video technology company, Money Alive is offering all Alliance members a free version of their popular Office product.

This new video boxset enables Alliance members to send clients interactive educational video experiences on the universally important topics of investment risk and scams, then evidence their engagement and understanding.

Both videos include the Money Alive Office reporting feature which helps firms evidence a client’s engagement and understanding.

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This new tool helps firms of all sizes assess, quantify and easily report on their client-centric readiness and compliance status, and identify sustainable business growth opportunities.

Developed by the Consumer Duty Diagnostic, in partnership with the Alliance, it’s free to use, takes just 10 minutes to complete and enables firms to assess themselves against the Duty’s four outcomes and key factors such as culture and client advocacy.

Upon completion, users immediately receive a personalised report recommending appropriate actions to meet Consumer Duty requirements and explore new commercial growth opportunities.

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