Rollercoaster ride against a blue sky day

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Hold on tight: The FCA takes financial advice firm on an uncomfortable £426 million ride

Wednesday 28 February 2024 was a dark day indeed for St James Place (SJP), as they saw their shares plunge by almost 30% – wiping £1 billion off its market cap before seeing some partial recovery.

The dramatic drop came after the UK’s largest advice firm released its annual results with news that they would have to pay an extra £426 million to refund customers who may have received insufficient levels of service.

Unsurprisingly, in light of recent events, the FCA has increased scrutiny over ongoing fees and service.

Indeed, in mid-February 2024, the regulator wrote to 20 of the largest advice firms, quizzing them on how they had “assessed their ongoing services in response to the introduction of the Consumer Duty, and whether they have made any changes as a result”.

As SJP work to close gaps in their record-keeping and review customer records going back to 2018, other financial advice firms should take heed.

Consumer Duty and ongoing servicing collide

In short, if you charge ongoing fees, you may be at risk of claims if you:

  • Haven’t seen or been in touch with any of your clients for years
  • Have failed to proactively update clients
  • Haven’t tried to get in touch.

If you fear this may be the case, the first and most important step you could make is to review your client files and contact those clients who you haven’t been in touch with for 12 months or more.

Be sure to update your client files to record the action you have taken – typically, the more detail you include, the better.

Read more: Increased scrutiny over fees and ongoing service creates more potential for complaints

As well as checking your client files and contacting any paying clients you haven’t been in touch with, take the time to review your terms and servicing proposition.

Check that you are delivering what your clients have paid for and expect

The FCA dictates that: “Ongoing charges should only be levied where a consumer is paying for ongoing service, such as a performance review of their investments, or where the product is a regular payment one.”

If you provide an ongoing service, you need to make this clear to your clients. Confirmation should include details of the service, associated costs, and how the client can cancel the arrangement.

Finally, to make sure your clients receive the ongoing service you have committed to, it’s important to ensure you have robust systems and controls in place to meet expectations.

As with ensuing fallout of any drama, while you’ll hopefully find that you have been charging appropriately and been in touch with paying clients at appropriate intervals, there’s no escaping the fact that some advisers may be unfairly caught up in complaints they don’t deserve.

Check your professional indemnity insurance

While in review-mode, now might be a good opportunity to dig out your professional indemnity insurance (PI) documents and talk to your broker to check exactly what is and isn’t covered in the event of a complaint.

On the subject of insurance, it’s probable that you may see premiums rise in future years. This is an unfortunate knock-on effect of an event such as the one triggered by the SJP saga.

By reviewing your client files and business processes, you give yourself the best chance of being well-positioned to mount a robust defence in the event that a client makes a claim, and could help to keep future PI premiums at a somewhat reasonable level, too.

Get in touch

Jencap Partners ensure a pragmatic approach to dispute resolution and are well-placed to advise on a range of compliance support, including system and control reviews, risk assessments, PI insurance, and training.

Find out more about how we could help by talking with one of our experts.

We’d be delighted to answer your questions. Please email mail@jencap.partners, book a short call by completing our online form, or call 029 2000 2325.