FCA flags gaps in suitability reviews despite high compliance

The UK’s Financial Conduct Authority (FCA) has found that most financial advice firms are delivering suitability reviews as required, but gaps remain in a small number of cases, prompting calls for stricter adherence to regulatory obligations.

A review of 22 major financial advice firms revealed that suitability reviews were conducted in 83% of cases, ensuring clients received the necessary assessment of their financial arrangements. A further 15% of clients declined or failed to respond to offers of a review.

However, in fewer than 2% of cases, firms did not attempt to conduct the promised suitability checks—raising concerns about compliance gaps.

Regulator Pressures Firms to Close the Gap

The FCA is now urging financial advisers to assess their internal processes and ensure they are meeting contractual commitments for ongoing financial services. Simon Walls, the regulator’s interim executive director of markets, underscored the importance of maintaining high standards:

“Ongoing advice plays a crucial role in financial decision-making, and while most firms are fulfilling their duties, those failing to do so must take corrective action.”

The watchdog also confirmed that it is reviewing rules governing ongoing advice services to determine whether regulatory changes are needed to enhance consumer protection and ensure firms remain accountable.

Consumer Protection Measures

For clients who suspect they have not received services they have paid for, the FCA advises reaching out to the firm directly. If concerns remain unresolved, the Financial Ombudsman Service can intervene. The regulator also warned against using claims management companies, noting that complaints can be filed directly at no cost.

The findings come as the FCA continues its scrutiny of financial advice models, particularly in light of the Consumer Duty rules introduced last year, which place a greater emphasis on ensuring firms deliver fair value and positive outcomes for customers.

With the regulator stepping up oversight, firms that fall short of compliance could face heightened scrutiny—or worse, enforcement action.