2025 supervisory and enforcement risks for investment advisers: the FCA’s ongoing advice review – why it isn’t ‘job done’ just yet

This is the first blog in a four-part series covering key supervisory and enforcement risks for investment advisers in 2025. 

A year on from the FCA’s announcement of its ongoing advice review, it has published the results. The FCA’s review requested information from 22 of the largest advice firms to complete a survey about their delivery of ongoing services. This was hot on the heels of previous FCA communications around how advisers needed to deal with customers under the Consumer Duty. The FCA flagged concerns that some customers may have been paying investment advisers for a service – like an annual review – without receiving it.

Paying for services they are not receiving was an early example of consumer ‘harm’ surfacing following the introduction of the Consumer Duty. Some big-name players had to amend their business models as a result. The FCA has concerns that ongoing advice services ‘may not always have been delivered where they should have been’. 

Given this, it is perhaps surprising that the FCA’s review, which focused in on the delivery of ‘suitability reviews’ as part of an ongoing advice service, found that these were delivered in around 83% of cases. In a further 15% of cases, the clients declined or did not respond to an offer of a review. In 2% of cases, the firm had not even attempted to conduct a review – these cases will likely require the firm in question to pay redress. The FCA concluded that it does not currently view this issue as systemic, but will continue to monitor the situation. 

Ostensibly, that would appear to be ‘job done’ for the advice market. As ever, the reality for firms in this sector is a little more nuanced. While the FCA did not find systemic issues for the participant firms, the sample population was not a representative sample of the wider market. Also, some firms performed better than others. 

The FCA has also said that 90% of new clients across the market are placed into arrangements with ongoing advice provision and 80% of advice revenue derives from the provision of ongoing advice. 

Combining these two factors means it is imperative that firms get this right and understand how the FCA’s expectations are evolving. The FCA expects firms to consider its findings and whether they can evidence the delivery of ongoing advice services. If not, the FCA expects firms to remedy the position.

Risk management

Despite the positive headlines, there are a number of points in the FCA’s feedback for all firms to consider, stretching across the full customer journey. Firms would be well advised to assess current practices against the standards the FCA is setting here.

• Onboarding – Are you marketing and drafting contractual documents clearly? Can you demonstrate (with evidence) that your customers understand the services for which they are paying, what types of reviews they will be entitled to and how often they will occur? 
• Ongoing contact – Can you identify, for individual clients, when a review has been offered; what communications have been sent and when; and what the response was? Is there a clear escalation procedure for customers that do not respond to requests to hold a review?
• Suitability reviews – As part of your suitability reviews, is there a clear process for: updating clients’ circumstances, objectives, attitude to risk and capacity for loss; reviewing risk profiles, charges and performance of existing investments; and communicating that the outcome of the review is a personal recommendation. Are your records of reviews up to date?
• Escalation procedures – Are these feeding in non-responders? What is the governance around this? Are cases invovling non-responders being identified, assessed and reviewed? Are you coming to a conclusion about whether the product is still delivering good outcomes for this cohort and is there a clear policy for reimbursing/ceasing charging fees where it does not? 
• Monitoring – How appropriate is your management information? Is it sufficient to facilitate adequate senior management oversight? Do record-keeping practices track delivery.
• Past business reviews and complaints – Consider whether this is appropriate (the FCA has suggested that these should cover ongoing advice services provided since 2018). This might involve a customer contact exercise, to determine whether harm has occurred as a result of firm failings. Where appropriate, firms might also need to consider whether payment of redress is appropriate, especially if firms receive and uphold customer complaints.

Redress

Prompt identification of harm and payment of redress is one of the cornerstones of the Consumer Duty. This review gives an insight into the FCA’s expectations for those 2% of cases that failed to deliver suitability reviews, and some wider lessons for all firms. 

The FCA indicated that, where a firm was willing to deliver the review, but the customer declined it, redress is less likely to be due. This same is likely to be the case where a firm made proportionate and good faith attempts to contact their customers but failed to engage them. However, where a customer consistently declines this service (despite paying for it), or persistently cannot be reached, firms need to ask themselves potentially difficult questions about whether they are delivering a ‘good outcome’ for that customer.

The phrase ‘proportionate and good faith attempts to contact customers’ also raises the spectre of ongoing disputes with the FCA about the adequacy of firms’ attempts to engage customers. Ideally, firms will reach out using a range of different media (letters, texts, emails) to build up a credible evidence base to support the conclusions that customers made a positive ‘choice’ not to engage (although note the same question about delivery of good outcomes will likely arise for those who persistently disengage). This might be through the preparation and adoption of a pro forma suite of communications sent to the customer to attempt to engage them.

There will be edge cases – a client who has only missed one of several scheduled annual suitability reviews might require a different response to a client who has missed almost all of them. From a qualitative perspective, it’s also worth considering the impact of not conducting suitability reviews. Clients’ circumstances can change over time. They might move in and out of vulnerability. Where that client has invested in a managed fund, the impact of these changes may be mitigated. In contrast, active model portfolios can ‘drift’ without regular client input. This relative risk of harm to a client feeds directly into the risk to a firm of not conducting regular reviews – it should be tracked through monitoring and surfaced in management information. The FCA’s supervisory and enforcement activity against firms is often triggered by practices that generate a ‘risk’ of harm – there is no need for that harm to crystallise. 

Next steps

The FCA has confirmed that it will conduct more work later this year to assess firms’ responses to these issues and the actions that they have taken.

It is important that firms take the steps suggested above to mitigate against the risk that the FCA takes further supervisory or enforcement action against the firm. 

The FCA also plans to review the current rules on ongoing advice services and will engage with the sector on this in 2025.

If you would like to speak to one of our experts about the above, please get in touch.