FCA’s Review: Wealth Managers surprised by positive findings

What happened?

A recent TCC poll revealed that 72% of wealth managers viewed the FCA’s ongoing advice services review findings as more positive than expected. However, experts caution against premature relief.

The regulator’s findings are heavily based on self-reported data and adviser attestations, rather than qualitative reviews of client files. There is significant variability in the quality and consistency of these responses across the industry.

Why does it matter?

The FCA is expected to revisit this area later in the year, and firms must be able to back up their claims with hard evidence. Relying purely on practice management system data as proof of a review is unlikely to satisfy supervisors.

Firms need to show that reviews were substantive, including updated KYC, recent attitude-to-risk documentation, and suitability letters or contact logs for every service period dating back to 2018.

Who is affected?

Wealth management and financial advice firms providing ongoing services and charging annual advisory fees.

Key risks

• Relying on weak or incomplete records in practice management systems as evidence of advice.
• Supervisory intervention if file samples fail to prove that a review took place.
• Potential redress liabilities for clients charged ongoing fees where no substantive review was delivered.

Actions to take

1. Audit a representative sample of client files to assess the quality of evidence supporting your ongoing reviews.
2. Verify that every client charged since 2018 can be mapped to one of the three FCA review buckets.
3. Update fair value assessments and disengagement processes to handle non-engaging clients.

Wider implications

The transition under Consumer Duty from ‘tell me’ to ‘show me’ means firms are fully responsible for evidencing compliance. Proportional and risk-based sampling of client files can help identify weaknesses before the regulator intervenes.

Recommendations

TCC recommends wealth managers conduct a backward-looking review to 2018 to evaluate files, identify gaps, and ensure a robust forward-looking compliance framework is in place.