Consolidator advice firms have failed to “consistently show that clients’ needs were suitably considered”.

This was the conclusion of an FCA review related to acquisitions, with officials left unhappy over the findings.

The regulator studied investment advisory firms’ practices when acquiring clients from other firms.

The aim was to see how they treat the clients they acquire from advisory firms or client banks.

The FCA said all of the six firms assessed failed to meet its requirements for providing clients with enough of their information needs in a way which is “clear, fair and not misleading”.

The report stated: “While we did see some good practices, we were disappointed overall that none of the firms assessed were able to consistently show that clients’ needs were suitably considered.

“We found that, while firms focused on the commercial benefits, they did not focus enough on how clients were impacted by the acquisition.

“Where firms had clearly considered potential disadvantages to clients and designed their practices to mitigate these, this approach was not consistent across all of the aspects we assessed.

“This resulted in a potential detriment for clients whose needs had not been appropriately considered. 
Our outcomes testing of replacement business did not indicate widespread common themes of unsuitability. However, we did identify individual areas requiring improvement for many of the firms assessed.”

The FCA said its key findings were:

• details of the services offered by the new firm and the associated level of charges were not provided to clients at the start of the relationship

• differences between the service offered by the new firm /adviser and that provided by the previous firm /adviser were not explained (eg differences in frequency of reviews or rebalancing exercises)

• clients were not told about any difference to the tax (VAT) status of the ongoing service charge

• clients were not told they could opt-out of any ongoing service the acquiring firm intended to provide

• where historic advice responsibility was not taken over by the new firm, clients were not told about this

• clients were not told how they could complain about advice given by the original firm 


• firms did not always recognise where the contract between the original firm and the client did not allow ongoing services provided and charged for to be transferred to the acquiring firm.

From an initial nine firms identified as acquiring clients from other firms, the FCA carried out a targeted review of six of them.

The report stated: “We know this sample may not be representative of the wider market, but want to share our findings so that firms can consider the key points raised when acquiring new clients.”