I suspect a cold shiver went down many the backs of many at the larger adviser firms this week with news that the FCA is asking for details of their ongoing charges.

The FCA announced it would survey the top 20 advice firms to ask how they were implementing ongoing charges in relation to the Consumer Duty and to explain how charges were applied when the ongoing advice was perhaps not.

So what’s the FCA up to?

This is always a difficult one to answer. Having read through the documents a couple of times much of the language is quite ‘coded’ and open to interpretation.

I do not think that it will be followed by an immediate change to the FCA’s regulations on ongoing charges but it would be naive not to imagine that the FCA will not scrutinise ongoing charges much more carefully in the future.

The issue of ongoing charges and how they are applied has been rumbling in the background for some years.

It’s fair to say that, at least from a Financial Planning perspective, it’s pretty clear what the initial charge is all about. There’s a huge amount of work that goes into building the Financial Plan and setting everything up for the clients. I’ve heard few complaints that the initial cost of the financial plan is not pretty clear to most clients.

Ongoing advice and other charges are another matter. Here there are as many policies as there are different Financial Planners.

Financial Planning is a long term model so while many planners will perhaps ‘subsidise’ the financial plan at the outset, the long-term value of the client is the ongoing charges or fees they pay. These can be £10,000 or £20,000 a year or more for wealthier clients.

The question here is what do they get for their money, is it fully understood and is the advice and ongoing service being delivered? These are some of the questions the FCA will be seeking answers to.

I’ve certainly heard of some excellent service being provided to clients who, for relatively modest cost, have their portfolios professionally managed and get half yearly or annual reviews of their financial plans, with changes made accordingly. Many clients are perfectly happy with this arrangement, like the idea that a professional planner is looking after their finances and can see the value they get. Peace of mind is one big bonus and its value no doubt goes up over the years.

There is an issue around percentage charges. There is some validity in charging a percentage of underlying funds under advice. It is at least clear although it may not always reflect the amount of time or advice given.

Despite all the positive aspects of ongoing advice I also regularly hear of examples of very poor service. In our popular Planner Casebook feature in Financial Planning Today magazine it’s quite common for clients to move from one planner to another because they felt ’neglected.’ In other words the ongoing advice and care was not being given or was of limited value.

All of this suggests there is work for the FCA to do. Good adviser and planner firms which concentrate on giving professional and comprehensive advice at all times have nothing to worry about.

Those firms which onboard a clients' investments to their platforms and then forget about them should perhaps review they way they work. 

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Kevin O’Donnell is editor of Financial Planning Today and a journalist with 40 years of experience in finance, business and mainstream news. This topical comment on the Financial Planning news appears most weeks, usually on Fridays but occasionally other days.  Email: This email address is being protected from spambots. You need JavaScript enabled to view it. Follow @FPT_Kevin