10.6 Monitoring and Reviewing Client Circumstances
Key Takeaways
One-off advice does not automatically include continuing monitoring; define and disclose any ongoing service agreed with the client.
For periodic MiFID suitability assessments, COBS 9A.3.9R currently requires at least annual review, with more frequent assessment when warranted.
Material life events can prompt an earlier review; ordinary price movements need to be considered against the client’s objectives and agreed monitoring triggers.
COBS 6.1A.22R distinguishes charges for ongoing services from the permitted regular-payment arrangement in which no ongoing service is provided and this is disclosed.
Update client information, assess the costs and lost benefits of switching, and distinguish individual advice reviews from product distribution reviews.
Define the Service Before Charging for It
A recommendation and a continuing advice service are different commitments. One-off advice requires suitable advice at the point of recommendation; it does not automatically promise lifelong portfolio monitoring. An ongoing service must be clearly described so the client understands what reviews, contact and support the firm will provide. Other duties and the consequences of the original advice do not disappear merely because an engagement is described as one-off.
| Question | One-off engagement | Agreed ongoing assessment |
|---|---|---|
| What is assessed? | The recommendation using relevant client information | Whether recommendations remain suitable as information changes |
| Is future monitoring automatically included? | No; check the service agreement | The firm must deliver the agreed service and meet applicable rules |
| What information matters? | Current objectives, finances, knowledge and experience | Updated information and changes since the previous assessment |
| How are charges explained? | Identify the service and payment terms | Identify continuing services, charges and cancellation rights |
Current Periodic Suitability Rules
For a firm providing a periodic suitability assessment of MiFID recommendations, COBS 9A.3.9R requires review at least annually. The frequency increases where the client's risk profile and the type of instrument require it. The related insurance-based investment product rule, COBS 9A.3.10R, also requires at least annual assessment, with frequency adapted to the client and product.
The firm explains the frequency and extent of assessment, any conditions that trigger it, what client information will be reassessed and how an updated recommendation will be communicated. Periodic reporting must explain how investments continue to meet the client's preferences, objectives and other characteristics; it need not reproduce every detail of the initial report.
Apply the current rules, not a consultation proposal. The FCA's CP26/10 proposes changes to periodic review requirements, but a proposed needs-based approach is not permission to disregard the currently applicable annual requirement.
Review Triggers and Updated Information
A scheduled review is one trigger. Changes such as redundancy, divorce, serious illness, bereavement, a substantial inheritance or approaching retirement may justify an earlier assessment. Their importance lies in their effect on objectives, income, liabilities, dependants, liquidity needs or ability to bear loss.
For example, redundancy may turn a long investment horizon into a near-term need for accessible funds. An inheritance may increase assets but also introduce new tax and estate-planning considerations. Neither event automatically means “sell everything”; the adviser first updates the facts and evaluates the implications.
A modest market movement by itself does not always require an extra review. Check the agreed monitoring thresholds, portfolio risk and client needs. Conversely, do not ignore a significant market event simply because the calendar review is several months away.
A practical process is to ask the client to confirm the existing fact-find, record changes and resolve missing information before assessing suitability. A statement such as “nothing has changed” should not substitute for checking the relevant areas. Keep an intelligible record of the information used and the reasons for the conclusion.
Charges and Cancellation
COBS 6.1A.22R allows a charge payable over time in two specified situations. Under its ongoing-service route, the service and charge must be disclosed, and the client must have a reasonable right to cancel without penalty or giving a reason. Under its separate regular-payment route, the specified product or arrangement has a client instruction for regular payments and the firm discloses that no ongoing personal recommendations or service will be provided. Thus, instalments do not invariably prove that an ongoing advice service exists.
Where a fee specifically pays for an agreed ongoing review service, the firm must deliver that service. Relabelling an undelivered service does not solve the problem. Charges disclosure should identify the service, payment terms and cancellation arrangements. Explain any separate charges that continue after the advice service is cancelled.
Assessing Changes to Existing Products
A recommendation to switch must satisfy the applicable suitability rules, including COBS 9 or 9A as relevant. Compare the position before and after the proposed change:
- Exit costs: surrender charges, dealing costs and other penalties.
- Tax: for example, whether a disposal creates a taxable gain.
- Lost benefits: valuable guaranteed annuity rates, investment guarantees, protected tax-free cash or a protected pension age where applicable.
- New costs and benefits: the total cost, accessibility, investment choice and service offered by the replacement.
An older contract is not automatically inferior. A lower headline annual charge may be outweighed by exit costs or the loss of a valuable guarantee. Repeated switching to generate adviser remuneration conflicts with the client's interests; the recommendation needs a client-centred justification.
Individual Reviews and Product Governance
The scope of the advice engagement determines which existing holdings the adviser has undertaken to review. Do not imply that every one-off adviser must monitor all products the client ever bought.
Product governance operates at another level. PROD 3.3 addresses distribution of financial instruments and structured deposits, while PROD 4.3 addresses insurance distribution. Reviewing distribution arrangements and target markets is distinct from assessing an individual client's suitability. Product governance does not, by itself, create a personal ongoing advice contract with every customer.
Worked Review Sequence
- Check the agreed service and when the review is due.
- Update objectives, finances, knowledge, experience and risk-related information.
- Assess whether existing recommendations remain suitable.
- Compare any proposed change with keeping the existing arrangement, including costs and lost benefits.
- Communicate the conclusion and the personal reasons for it; disclose relevant charges.
- Record the assessment, implement authorised changes and arrange the next review.
For the exam, distinguish three questions: whether an ongoing service was agreed, which periodic-assessment rule applies, and whether the client has actually received the service being charged for.
Sources: COBS 9A, COBS 6, FCA review of ongoing advice, and CP26/10 consultation.
A firm charges 0.5% annually specifically for an agreed ongoing suitability-review service, but provides no review or other promised service. This is not an instalment arrangement for initial advice. Which conclusion is correct?
Client consent to the fee is sufficient even if the promised service is absent
The fee can continue if the investments have risen in value
The firm has failed to provide the ongoing service supporting the charge under COBS 6.1A.22R
The fee can continue until the client asks for a new recommendation
An ongoing client has a scheduled annual review. Which event is least likely, by itself, to require an additional out-of-cycle review?
A small market-driven fall within agreed monitoring tolerances, with no change in the client’s needs or objectives
A divorce settlement that materially reduces investable assets
Redundancy that significantly reduces income and capacity for loss
A substantial inheritance that changes financial objectives
A firm provides periodic suitability assessment of MiFID investment recommendations under the current COBS 9A rules. Which requirement applies?
Review only when the client requests it, if the portfolio has not changed
Review at least annually, more often when warranted, and explain continued suitability in periodic reporting
Review every three years unless an investment is sold
Send a valuation annually and reassess suitability only before a switch
Sections you finish are checked off in the contents.