The introduction of RDR saw the biggest overhaul of financial regulation since the introduction of the Financial Services Act in '86. The main purpose of RDR was to improve services and ensure transparency, which safeguarded the interests of clients and the adviser. Whilst many were already offering this, RDR made it compulsory and presented the opportunity to review service levels, and in some cases, overhaul business propositions. As part of this, it's likely that some form of ongoing review was offered to existing and new clients, with clients understanding they were paying for the service not the sale.
Client segmentation and different service levels have resulted in review standards varying from periodic in-depth face to face meetings to simple valuation statements via post, but whatever the service level, you are obliged to meet it. Having a consistent approach is key for your own in-house processes as well as ensuring that all clients are being treated fairly. A documented process for ongoing reviews is essential to any successful business model and will help provide consistency. This can be split into three areas, Preparation, Production and Post Review.
At this stage it is perhaps prudent to get your client to complete a short update questionnaire and perhaps revisit their risk profile. This gives you the opportunity to see what has changed since the last review. New family members could mean a financial protection review is needed. It's also wise to remind the client what they can expect from their review meeting and exactly what they're getting for their money.
Some of the key things that are likely to be included are:
- Up to date Net Worth Statement (perhaps with comparison to previous review);
- Review of client objectives and any changes;
- Confirmation of Risk Profile and Capacity for Loss, again detailing any changes;
- Up to date cash flow modelling;
- Review of existing plans, including any protection plans;
- Portfolio review to include asset allocation and investment returns, advising on any rebalancing that is required (particularly if change in Risk Profile);
More often than not there will be something that needs doing after a review has taken place, which could include.
- A quick letter confirming any action agreed at the meeting;
- A suitability report if advice was given;
- Updates to cash flows & further options/assumptions/goals were discussed;
- A revised valuation statement to show any rebalancing that has been undertaken.
Of course, how much and how little is done at each review will depend on the Service Level agreed. It is important, however, that you are delivering what you promise and what you deliver is consistent across your various client categories.
The FCA has already undertaken a Thematic Review of Adviser Charging and Services in December 2014. Some of the key findings from their consumer research was:
- 65% of consumers who take advice are receiving ongoing services;
- The most valued element of ongoing services are those that provide evidence that 'personalised service' is being given. Must have services included access to their adviser, regular reviews, fund monitoring and switching and access to valuations;
- Regular reviews are highly valued by consumers and are viewed as key to the ongoing relationship.
More information regarding this Thematic Review can be found here: