The Consumer Duty regulatory framework, taking force in 31 July, 2023, is designed to improve consumer outcomes in financial services, and weed out poor practices. The FCA has asked businesses to show what progress – or not – has been achieved so far.

The Financial Conduct Authority yesterday said it has contacted 20 of the UK’s largest financial advisor firms on how they deliver their services, for which clients continue to be paid after advice is given.

The regulator is surveying firms about services to see whether the Consumer Duty regime – introduced at the end of July 2023 – is raising standards. Already, the Duty has prompted firms such as St James’s Place to adjust fees.

The FCA’s survey seeks data on the number of clients due a review of the ongoing suitability of the advice as part of the service, how many received that review, and how many paid for ongoing advice but whose fee was refunded as the suitability review did not happen, the watchdog said in a statement yesterday. 

The 20 firms receiving the FCA’s letter haven’t been picked because of any particular concerns, the regulator said.

“The FCA’s own data shows that 77 per cent of advice sector revenue comes from ongoing fees, so make no mistake, this is a big thing,” Mark Polson, founder and chief executive of the UK consultancy lang cat, said. “I’m sure we can all agree that everyone who provides an ongoing professional and valuable service deserves to be paid a fair price for it. So, we must also all agree that no customer should be paying an ongoing service charge where no ongoing service is being delivered.”

"Good advisors in well run advice firms have nothing to fear directly here, other than additional costs associated with increased evidence gathering,” he continued.

“However, there are shades of Australia’s Royal Commission in this where they uncovered misconduct relating to financial institutions charging customers for services that were not provided and, in some cases, that were never intended to be provided. The fallout from that Royal Commission in Australia has been seismic and industry redefining, with many large established institutions going to the wall and banks withdrawing from advice services,” he said. (Polson referred to the Commission’s report, in 2019, into widespread mis-selling and other poor practices in the Australian bank and wealth sectors. See a story here from 2018.)

“If the FCA is intent on going down a similar path, the ramifications here could be equally significant with a real risk of the good firms being tarred with the brush rightly applied to the bad actors,” Poulson added.