FCA reviews ongoing client services following Consumer Duty implementation

04 March 2024. Published by Hattie Hill, Associate and David Allinson, Partner

The FCA has made a request for information from a number of networks with a view to determining what further work is needed to ensure that ongoing services provide fair value under the Consumer Duty. It has also recently published a webpage with examples of good practice and areas for improvement.

On 15 February 2024 the FCA wrote to 20 of the largest financial advice firms to request that they provide information regarding ongoing client services, including the way in which clients are charged following receipt of advice. This follows the implementation of the Consumer Duty at the end of July 2023– the FCA is keen to know whether firms have assessed their ongoing services in light of the consumer duty and what changes have been made as a consequence. The regulator has contacted firms so as to gain a wide understanding of market practice - there are no specific concerns about the firms themselves. 

Part of the Consumer Duty includes an analysis of whether or not 'fair value' is being delivered and so these queries aren’t unexpected, particularly given the FCA previously raised concerns over clients paying ongoing advice fees without receiving any benefit.  The FCA has previously indicated to the sector that cross-firm work would be undertaken to ensure that concerns around ongoing costs for services to clients are being adequately considered, and whether they are indeed suitable in light of the implementation of the Consumer Duty. This follows the FCA having raised concerns in December 2023 around consumers paying for services that they were not actually receiving.

Around the same time, the FCA published a webpage concerning the implementation of the Consumer Duty showing "what firms are doing well and what they could do better". This gives some fairly extensive examples of good and poor practice across areas including culture and governance, vulnerable customers and products and services. In very general terms, the FCA is keen to stress that firms understand the need to work towards good outcomes for retail clients across all areas of the business, and that any gaps should be identified and tackled proactively without waiting for intervention from the FCA.

Finally, the Consumer Duty comes into force for closed products on 31 July 2024. In anticipation of this, Sheldon Mills of the FCA has given a speech highlighting the good work done by firms to date and stressing areas requiring attention ahead of the forthcoming deadline. After comparing the creation and implementation of the Consumer Duty to the invention of the Slinky and the World Wide Web, Mr Mills highlights that the need to provide fair value is probably the most challenging element of the Consumer Duty and that firms are perhaps not always relying on credible evidence to justify a product's value (whilst also noting that 37% of firms have reviewed or changed their fee structure since the advent of the Consumer Duty). He also identifies the key challenges on closed products, these being the need to take action with customers who are less engaged or who may have 'gone away', determining fair value on such products and addressing gaps in customer data.

This flurry of activity demonstrates how seriously the FCA is taking the Consumer Duty. The tone is generally collaborative for now, but that's likely to change if firms don’t address any concerns identified in fairly short order. We are perhaps coming to the end of what could be described as a grace period, and firms would be well advised to keep a keen eye (as we will be doing) on any further guidance coming from the regulator and reviewing their products and services to ensure that they are in line with any guidance.