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The City regulator has warned advice firms it may crack down on customer charges, following concerns that some clients are overpaying.
In a statement on Thursday, the Financial Conduct Authority said it had written to about 20 of the largest advice firms, asking for details of their delivery of ongoing services which clients are charged for once advice has been given.
The request forms part of the watchdog’s Consumer Duty regulations, introduced last year, which require companies to meet higher standards of customer protection. Under the new rules, firms must act in good faith towards customers, avoid causing foreseeable harm, and enable and support customers to pursue their financial objectives.
“The data gathering . . . forms part of [our] work to raise standards so people can invest with confidence,” the FCA said in the announcement. “Central to that strategy is ensuring people can access advice if they want it and have trust in the services on offer.”
The FCA has previously warned the retail investment industry that consumers are not always receiving value for money where ongoing services are offered by financial advisers. “We are concerned firms are not adequately considering the relevance, nature and costs of these services for all their clients,” Therese Chambers, director of consumer investments at the FCA, said in December 2022.
A year later, during a webinar, the regulator flagged concerns that some consumers might be paying for a service such as an annual review but were not actually receiving it.
In its survey, the FCA asked for information on whether firms had assessed the ongoing services they provide to customers as a result of the Consumer Duty, and whether they had made any changes as a result.
It also asked the companies how many clients they decided should have a review of the suitability of the advice they were receiving as part of their service, and how many had received that review. Companies were also asked about the number of clients who were refunded advice fees after not receiving a suitability review.
The list of companies which received the surveys was not based on any particular concerns with them, the FCA said, as the selection was to ensure it received the widest understanding of market practice. The FCA will update companies after considering the responses.
As part of the Consumer Duty, the FCA also put pressure on wealth manager St James’s Place to overhaul its fee structure, after facing scrutiny over what critics said were opaque and expensive charges. As a result, the FTSE 100 company announced the largest overhaul of its fees in its history, creating a new charging structure for the majority of new investment bonds and pensions sold to clients.
Other measures have included a warning to investment and pension platforms that the regulator will intervene if they unfairly withhold interest payments on customers’ cash balances or charge excessive fees for managing them.
A probe by the FCA said the amount of interest these companies had earned from customers’ cash balances had “increased substantially” in the past 18 to 24 months as the Bank of England raised the base rate of interest.
