Complaints about ongoing advice charges, where clients have paid for but not received a service, are not a new issue.
But a focus on ongoing fees has been renewed by some claims management companies, which are inviting enquiries from clients if they have not received a corresponding ongoing service.
And with the Financial Conduct Authority's consumer duty now in effect, this could also intensify attention on ongoing advice fees.
Julie Preston, a compliance consultant at The Verve Group, notes how one of the biggest challenges under the consumer duty has been assessing and demonstrating fair value.
She adds that the duty has brought to the forefront how the phrase ‘you get what you pay for’ is not always strictly true.
“Claims against firms who cannot provide the service that they are charging their clients for may, in our opinion, become more common,” says Preston.
“Following on from Mifid II and the requirement for periodic suitability assessments, it is now more prevalent than ever to ensure clients with an ongoing service have a need for it, are feeling the value for the price they are paying, and that that is documented.”
Tim Jenkins, a director at consultancy Jencap Partners, says it is “inevitable that CMCs will piggyback on consumer duty rules” to challenge ongoing advice charges, but that there are other factors at play.
“With the ongoing cost of living crisis causing many to feel financial pressure, it’s highly likely that we’ll see yet another jump in complaints relating across the board, and specifically challenges regarding ongoing adviser costs,” adds Jenkins.
Making clear commitments
B-Compliant director Jeremy Smith likewise notes how the FCA has continued to reiterate its stance on ongoing charges in more transparent disclosures by way of Mifid II, and during various webinars about the consumer duty.
“If you are providing an ongoing service, you should set out clearly the nature of that service, any associated charges and how the cancellation procedure works,” Smith says.
Russell Facer, chief executive of compliance specialist Threesixty, also highlights the importance of clarity with regards to a firm’s service, its charges, and why those charges are levied.
“A lot of firms, particularly clients we deal with, spend a lot more work in making sure they can evidence what good looks like, and making sure they have got a good proposition,” says Facer.
“So I think the claims will come [if] it’s not clear what was supposed to be happening: ‘I understood that I would be getting these and I’ve not been getting them’ – has there actually been an agreement put in place to say one way or another?”
With ongoing advice charges coming within the purview of CMCs, Michael Lawrence, a principal consultant at regulatory consultancy Bovill, says that whether advisers should be concerned comes down to what it is that a firm is committing to do within its ongoing service.
