Why the design of ongoing advice services is so crucial to meeting FCA expectations around fair value

Date: 23rd April 2025

Author: Sesame Bankhall Group

As firms will no doubt be aware, in February 2024 the FCA wrote to a number of financial adviser firms to request information about the delivery of ongoing advice services.

There has been continued focus in Dear CEO letters and FCA webinars on the issue of customers paying for services they haven’t received and the FCA has now published the findings of its multi-firm review. The review found that, in 83% of cases, firms had delivered what they promised and, of the remainder, that non-delivery in 15% of cases was due to clients declining reviews or failing to engage – this left only 2% if instances where firms had genuinely failed to attempt to provide the service.

So what are the regulator’s expectations and what does this mean should firms be doing in practice to make sure they are staying on the right side of the line?

Service design

It is worth going right back to the start and considering a few key questions in relation to the design of any ongoing advice proposition. Under the Consumer Duty derived rules, advice firms are considered ‘manufacturers’ in respect of the design of their own services and therefore the rules in PRIN 2A.3 that apply to the manufacture of products and services will be relevant.

Key questions:

• Have you clearly specified the target market for your ongoing services to the level of granularity necessary? 
• Where necessary, have you defined different propositions for different groups of customers?  For example, the components of an annual retirement income review service might be different than for a standard annual investment review service – Is it clear exactly what is going to be delivered?
• Have you clearly defined the type of customer for whom your ongoing services wouldn’t be appropriate?  (for example, this might be customers who do not have complex financial planning needs, or where solutions are recommended which do not really require an ongoing service (e.g. a single multi-asset fund matched to the clients risk profile))
• How have you satisfied yourself that the ongoing service is designed to meet the needs of consumers it is designed for?  For example, can you demonstrate they actually need all the elements being offered as part of that service?

The reason all these questions are important is that the FCA is not only focused on whether services are being delivered, but also whether some customers are paying for services they do not really need. The FCA is clear that, where a customer is paying for a service they do not need, then this will never represent fair value, regardless of how that service has been priced. 

Some firms might also need to seriously consider whether certain propositions actually constitute a true ongoing service – for example ‘retainers’ (where a customer pays an ongoing fee to secure access to advice services in the future),  or discussions around valuations/performance that stop short of making any personal recommendations (e.g. – that merely outline whether a customer is on track to meet their goals/target).

In addition to all of the above, firms should clearly confirm the details of the ongoing service to the customer (i.e. – what exactly will be delivered), the associated charges, and – importantly - how customers can cancel the service and stop payment of any charges if the service is no longer required.

Delivery and monitoring

The FCA stated in a Dear CEO letter to financial advisers and investment intermediaries that firms should not charge clients for services that are not delivered and must maintain records to ensure appropriate monitoring. This was one of the key points highlighted in the FCA Retirement Income Review, with the FCA saying:

“We expect firms to track and monitor when review meetings are due and identify whether any are missed. Where firms do not measure key information or are not able to access this easily, they may find it more difficult to demonstrate the delivery of good customer outcomes”

Firms should therefore ensure that record keeping allows them to identify those customers that have signed up to an ongoing review service, when these are scheduled to be delivered, and also be able to identify those instances where the service has not been provided. This might involve considering any gaps in existing processes, for example if advisers schedule their own annual reviews, how is this tracked and managed centrally?

It is also important to note that, whilst the FCA findings from the ongoing advice review were generally positive, there was a slight sting in the tail – The FCA have made it clear firms should be looking back over a 7 year period to 2018 and considering whether they delivered the ongoing reviews they were obliged to provide. Where any non-delivery was the fault of the firm, then the FCA expectation will be that firms should appropriately refund adviser charges and, also, that consideration is given to proactively contacting customers where the failure to deliver the service may have caused harm.

Taking action

But what if reviews have been missed?  It is perhaps inevitable that this will happen for every firm at some point for a variety of reasons – for example where customers do not engage following meeting reminders, appointments are re-arranged multiple times at a customer’s request, or a scheduled review hasn’t been delivered due to an adviser oversight.

The FCA has outlined its expectations fairly briefly and bluntly – firms should not be charging customers for services where they have not made a sufficient attempt to deliver the service that was agreed. So what steps should firms be taking?

Firstly, firms should have a clear process for non-respondents. This doesn’t need to be complex and, after issuing an initial meeting request/invitation, could be as simple as one or two subsequent reminders and outline steps for refunding any ongoing advice charges (or even instructing platforms/providers to pause adviser charges if these have not yet been taken).

We often get questions about whether adviser charges should be refunded in all cases, or whether there are any exceptions (for example if it this is due to clients simply not engaging or responding to adviser requests). The FCA position seems to be clear-cut where this is the fault of the firm:   customers should not be charged.

Where firms have made every effort to provide the service and non-delivery is a result of customers declining a review or failing to engage with firm’s requests, the FCA appear to allow some flexibility. The regulator has stated that that it is ‘less likely redress would be due’, although in reality it is only likely to appropriate not to refund fees if this is a ‘one-off’ instance – Where a customer fails to engage with subsequent reviews, firms would be expected to take a more proactive approach.

So, what if a client does frequently fail to engage with annual review requests? It might not be something you really want to consider but may be necessary to have a difficult conversation with the client about the importance of regular reviews, whether they value the service and, if not, why?

If this is a persistent pattern, then consideration will need to be given to ending that particular ongoing relationship and signpost the customer to other potential sources of guidance and support. Lack of customer engagement with annual reviews may also be an indicator in itself that the service isn’t needed or is poorly designed, for example it may simply be more appropriate for some customers to contact them periodically (say every 3 or 5 years) to offer them an ad-hoc review.

Understandably, advisers have concerns that this feels like leaving customers ‘high and dry’ and also question if this at odds with their Consumer Duty obligations, particularly to ensure they prevent causing foreseeable harm for customers. The FCA do, however, acknowledge that firms cannot prevent all harm and that customers have a role to play too – so if firms have been clear with regards to the reasons why they do not consider it viable to continue providing the service, pointed out the risks of not having regular reviews and have signposted the customer to other sources of support, then they have ensured the customer has been put in a fully informed position.

The design and delivery of ongoing advice services will clearly continue to be a focus for the regulator but, by taking a common-sense approach and, where necessary, making changes to propositions and processes, this will help demonstrate that customers are getting good outcomes.

How can Bankhall help?

To assist firms Bankhall have a range of guides and templates in the Consumer Duty hub on Bankhall Online to help firms outline the target market for their service propositions, and conduct and record the outcomes of their fair value assessments.

Bankhall can also offer an in-depth compliance support day designed to provide a detailed overview of the ongoing service proposition that you have in place – including a review of service design, pre and post review communications, and processes for client ‘offboarding’ where services are not being used or may no longer be appropriate.