Consumer Duty and the client you have not reviewed
Under Consumer Duty, a firm has to show what each client’s ongoing fee pays for.
Under Consumer Duty, a firm has to show what each client’s ongoing fee pays for.
This guide covers clients who have paid an ongoing fee for years without a recent review, such as a household whose adviser retired and passed them to you in 2017 and who you last saw before the pandemic.
Your compliance function owns the regulatory reading of this.
The Duty asks firms to be able to demonstrate that the price a client pays is reasonable relative to the benefit they receive. For a client who is reviewed annually, advised and reported to, that is a documentation exercise. For a client who pays the same percentage and has heard nothing for three years, it is harder.
These clients do not ask for anything, so their reviews get postponed.
Re-engage. Make contact, update the file, get the review done, put them back on a cycle. This takes time, and it is the right answer for most of them.
Change the deal. If a client does not want an annual review, offer a service and a price that fits them. That can be defended.
Let them go. Some households are below the level at which any servicing model works. Handing them to a firm whose model does fit is better for them than keeping them on a promise you will not deliver.
The fourth option, leaving it and continuing to charge, is not defensible.
A buyer lowers the price where many households have no evidenced review. Those households also carry a liability: a buyer taking on your clients takes on their servicing history.
A buyer who asks detailed questions about the clients who have gone quiet is being careful, and will probably run the firm carefully afterwards.
The work has two parts. Making contact, updating the fact-find, chasing the paperwork and booking the meeting is administrative. The review itself is advice.
With somebody to do the first part, the second fits into a normal week. Securo's trainee adviser programme does the first part: they reconnect with the legacy relationships and hand each one back for the advice.
The order in which to bring client files up to date in the eighteen months before a sale.
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How to reduce owner dependency, which lowers a valuation and can be reduced with one to three years of work.
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When to tell clients, what to say, and how the timing affects whether they stay.
Read itSteven Bates, Director of Advisory at Equity & General, takes the first call with every adviser. Ring him on 020 8396 0486 or send a short note about your firm.