The third and final of the FCA’s thematic reviews examining how firms implemented key changes brought about by the Retail Distribution Review (TR14/21), acknowledges visible improvements in disclosure – after concerns had been expressed in the second cycle about how they were presenting important information about their charges and services.
Overall, their findings provide further evidence of the increasing professionalism of the financial advice sector, although the document still identified scope for further improvements.
According to their research, the FCA reports that the majority of consumers are satisfied with the ongoing services they are receiving, and that their value acts as an important motivator in their decision to pay for financial advice. However, there remains scope for further improvements. In particular, some firms are failing to provide individual clients with clear disclosure, in cash terms, of the charges they will be paying for ongoing services.
To address the review’s assertion that some consumers have a limited awareness of the fees they are paying, it is important to design your disclosure to be as clear and engaging as possible. Make it positive. Champion what you do, and do not be shy about explaining what you are charging for, while taking care not to go too far and make extravagant or unsupportable claims.
The FCA’s four key features required to deliver a successful ongoing service are:
* Diary and resource planning: Scheduling the delivery of services for clients and ensuring adequate resource is available to carry out the activities involved.
* Formal review processes: Organising the preparatory work necessary for the delivery of the features of the ongoing service, recording the outputs from the process and providing a clear audit trail.
* Monitoring: Conducting regular assessments to check whether services are being delivered as agreed, and whether they are resulting in good client outcomes.
* Management information: Collecting appropriate metrics to track whether ongoing services are being delivered, and identifying potential risks to clients linked to their delivery. So find out what your customers value, and design your proposition accordingly, avoiding self-defeating transactions where the cost of delivering the service is so high that any benefit is lost.
If you offer differing levels of service, ascertain how many clients you have on the highest level, and make sure you have the necessary resources to deliver it. Can you service them all effectively if you have more than a given number at each level, and if not, what steps must you take?
Above all, ensure you give clients clear information about all ongoing service so they can make an informed decision about its value, the relative benefits, and whether they wish to pay for it.
The review contains some useful examples of good and bad practice against which to measure your current service design. If you find you have more good features than poor, eliminate or change the less satisfactory ones, then communicate any subsequent improvements to your clients. And check your MI to confirm if you are delivering the services you agreed to provide. If not, make sure you put measures in place to capture the detail and examine your disclosure, and charge accordingly.