16 February 2024 , 09:20
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The Financial Conduct Authority (FCA) is asking financial adviser firms if they've checked their services in line with a new rule concerning their duty to customers.
This rule means businesses must put customers at the heart of what they do and consider their interests above anything else. The FCA has said it's writing to several firms, asking about their ongoing services and if they are following the duty rule. These are services that clients keep paying for after they've been given advice.
The FCA is collecting this information as part of its work to make sure people can invest confidently. Under the consumer duty, firms need to make sure their products and services are right for consumers and offer good value.
They should talk to customers in a way that helps them understand and give support that meets their needs throughout the life of the product or service. This duty started in July last year for new and existing products or services.
In July 2024, it will also start for closed products or services. In its survey, the FCA is asking if firms have checked their ongoing services in response to the introduction of the consumer duty, and whether they've made any changes because of it.
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It's also asking for firms' data on how many clients are due a review of the ongoing suitability of the advice and how many have received that review. The regulator is keen to know how many people paid for ongoing advice but got their fee back because the suitability review didn't happen.
The FCA is gathering this information to see if it needs to do more regulatory work. It plans to give another update after looking at firms' responses. Around 20 of the biggest advice firms are receiving the survey. Their selection is not based on any particular concerns with those firms, the regulator said.
The city regulator is worried about various issues in the industry. In a letter sent in December 2022, the FCA said it was worried that advice firms weren't properly thinking about the relevance, nature and costs of ongoing services for all their clients.
Another letter sent in January 2023 explained how advice firms should think about the consumer duty, reminding firms that they need to act in good faith towards customers, avoid causing them foreseeable harm, and help them to go after their financial goals. In a consumer duty webinar with firms in December 2023, the FCA raised concerns that it seemed some consumers might be paying for a service, like an annual review, but were not getting it.