The Financial Conduct Authority has written to 20 of the biggest advice firms requesting information about their ongoing advice services on the back of the consumer duty.
In the survey, the regulator has asked firms if they have assessed their ongoing services in response to the introduction of the consumer duty and whether they have made any changes as a result.
It also asked for data on the number of clients due a review of the ongoing suitability of the advice, for which clients continue to be charged after the advice has been given.
The FCA also asked how many clients received a review and how many paid for ongoing advice but whose fee was refunded because the review did not happen.
The regulator said it is collecting this information to assess what, if any, further work needs to be undertaken in this area and will provide an update after considering firms’ responses.
Mark Polson, founder & chief executive of the Lang Cat 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.
"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."
He added: "Good advisers in well run advice firms have nothing to fear directly here, other than additional costs associated with increased evidence gathering. 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. 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."
In a letter sent in December 2022, the FCA set out its concerns that advice firms were not adequately considering the relevance, nature and costs of these ongoing services for their clients.
Then in January 2023, a second letter was sent by the regulator explaining how firms should approach the consumer duty reminding firms to act in ‘good faith’ towards customers and to avoid causing them ‘foreseeable harm’.
The FCA had expressed concerns during a consumer duty webinar in December 2023 saying some consumers may be paying for a service, such as an annual review, but were not receiving it.
Speaking to the Treasury last year (December 12), FCA chief executive Nikil Rathi said the “cross-cutting” nature of consumer duty, which was introduced in July, can “underpin” the regulator’s other work.
