13May

The financial adviser of years gone by may have been viewed as something akin to a salesperson, who would simply process a product recommendation on behalf of a client, and then wait for the client to contact them again.

However, today’s financial adviser has a duty to provide an ongoing service to ensure clients’ financial needs continue to be satisfied. This is especially true if the client is paying regular fees in expectation of receiving such a service.

In May 2017, it was revealed that national advice firm St James’s Place (SJP) had paid £5,000 in compensation to a client who complained via the press about the lack of ongoing servicing provided by the firm.

Sue Preece-Murray wrote to the Money section of the Sunday Times newspaper, expressing her frustration that she had paid £6,400 in ongoing advice charges since becoming a client of the firm in 2012, but had met her adviser on only two occasions since then. She described her frustrations at being unable to secure meetings with the adviser, saying that the firm would often tell her that he was away on holiday. She became so exasperated with the situation that she even offered to drive 200 miles to facilitate meetings.

SJP made an initial offer of £1,900 to Ms Preece-Murray after the newspaper contacted SJP on her behalf. This compensation offer was subsequently increased to £5,000 after the client rejected the initial offer. The firm conceded that its service had “not been what we would expect”.

SJP also cancelled any ongoing charges which had been put in place on the investments Ms Preece-Murray had taken out since the start of 2013, when the Retail Distribution Review came into force. She will however need to continue to pay ongoing charges for contracts taken out prior to this, unless she wishes to pay exit charges to end her relationship with SJP.

An SJP spokesperson said:

“In our experience, one of the things our clients value most is their relationship with an adviser. However, we accept there may be exceptional circumstances, such as [the Preece-Murray case], where this may no longer be the case and on these occasions, we will seek a solution on a case-by-case basis.”

Advisory firms need to have robust systems in place to ensure that they provide ongoing service to clients who are paying regular fees. Furthermore, firms must ensure that they can provide evidence to show that these ongoing reviews have indeed taken place. Many firms for example take 0.5% of the value of an investment each year as an ongoing advice fee.

Exactly what level of ongoing service will be provided must be clearly spelt out at the start of a firm’s relationship with each client. This is usually covered in a Terms of Business document or an Initial Disclosure Document.

Ongoing servicing might involve:

• Asking about any changes in clients’ circumstances, and considering how their financial plan may need to be altered as a result
• Monitoring the performance of investments, and recommending switching where suitable
• Checking that the investment fund mix matches the client’s risk profile
• Considering if it is appropriate to access any, or all, of the amounts invested

Clients who are dissatisfied with the service they receive in this respect can complain to their firm, and then to the Financial Ombudsman Service, and may then be entitled to compensation.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.