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The FCA has found 231 firms which have charged for ongoing advice but not delivered.
The issue affected 6,108 clients out of a total of 213,128 (2.9 per cent) who had paid for, but did not receive, an annual review in 2022.
As part of the regulator's thematic review on retirement income advice, it found some firms were unable to provide the number of missed reviews.
However, the key reasons an annual review was not given were:
- Clients declined or did not respond (cited by 382 firms)
- Firm error or oversight (29 firms)
- Employee resource (10 firms)
- Data not being measured or recorded (157 firms)
The FCA said in cases where customers are paying for ongoing advice, firms should set out clearly which services are included.
It stated: “We would expect firms to track and monitor when review meetings are due and identify whether any are missed.
“Where firms do not measure key information or are not able to access this easily, they may find it more difficult to demonstrate the delivery of good customer outcomes.”
In this area, the FCA highlighted the good practice of one firm which had an ongoing service document which set out what was expected of advisers and gave information to customers on what would be covered in ongoing reviews.
However, poor practice was illustrated by one firm which acknowledged ongoing reviews could be missed but did not have a process to mitigate this or set out the action it would take to ensure customers were not paying for a service they did not receive.
The issues of ongoing advice charges has been highlighted by the FCA recently.
Last month (February 15), it wrote to 20 of the biggest advice firms requesting information about their ongoing advice services on the back of the consumer duty.
Following this, St James's Place set aside a provision of £426mn for potential client refunds to address ongoing advice issues, after it saw an uptick in complaints.
Then earlier this month, Quilter said it could pay remedial costs after it was one of 20 large firms the regulator wrote to.
Issues with decumulation
As part of its thematic review, the FCA also found not all firms were taking into account the differing needs of customers in decumulation, compared with accumulation.
The FCA said there were examples of poor practice where firms had not considered the needs of their customers or advised in a way likely to lead to good and consistent outcomes.
The review added: “We also found instances where some firms had not provided the right information to support their customers to make informed decisions.”
The FCA spoke to 977 firms who responded to an 87-question survey and also carried out a desk-based review of the advice models and files of a sample of 24 firms.
The review said firms have potential conflicts of interest in which course of action is recommended.
This is because solutions where a client’s pension remains invested means firms can charge for ongoing advice, whereas annuities do not.
The FCA said before pension freedoms 90 per cent of pots were used to buy annuities, whereas now it stands at just 10 per cent.
Responses from 796 firms show flexi-access drawdown was the most common recommendation across all pot sizes.
And responses from 456 firms showed the most common objective for customers seeking advice was for decumulation advice and options available.
A Dear CEO letter, published alongside its thematic review on retirement income this morning (March 20), promised to carry out more supervisory work into the retirement income advice market to identify the scale of the issues.
tara.o'connor@ft.com
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