A while back, I wrote about how every firm we work with seems to run its annual review process slightly differently. The same consultation proposing changes to what counts as sufficient information (see last week’s issue) is also proposing that firms should instead offer periodic reviews at a frequency reflecting the client’s needs, rather than a fixed annual one.

On paper, that sounds like flexibility. In practice, it’s a new decision a firm now has to make, and be able to explain.

 

Why “periodic” is harder than “annual”

An annual review has one big advantage: nobody has to think about it very hard. The date comes round, the review happens. It isn’t necessarily the right cadence for every client, but it’s simple, and it’s consistent.

Periodic reviews remove that simplicity. If the frequency is meant to reflect the client’s actual circumstances, someone has to decide what those circumstances call for, and then be able to explain why. A client in drawdown, relying on the portfolio for income, probably needs checking in on more often than someone twenty years from retirement with a straightforward pension. That much is obvious. What’s less obvious is how a firm decides, consistently, where every other client sits in between.

And once that decision exists, it needs the same discipline the annual review used to get automatically. If a client goes eighteen months between reviews instead of twelve, was that decided deliberately, based on their situation, or did it just happen because nobody flagged it?

 

What’s worth thinking about now

• Look at how review frequency actually gets decided today. Is it genuinely need-based already, or has “annual” been doing the thinking for you?
• Build some simple criteria for what pushes a client toward more frequent reviews. Drawdown, vulnerability, recent life changes and volatile portfolios are the obvious starting points.
• Document the reasoning per client, not just the date. “Reviewed every 12 months” and “reviewed every 12 months because of X” are very different things to show a regulator, or a new adviser picking up the file.
• Think about capacity. If review frequency becomes genuinely variable across the client bank, the servicing model behind it needs to flex with it too, not just the calendar.
• Check that the service agreement, client communications and charging structure still accurately describe what the client will receive.

That last point is one we spend a lot of time on with firms, if I’m honest. It’s rarely the review itself that’s the hard part. It’s building a servicing model, and a fee structure, flexible enough to support reviews that don’t all happen on the same twelve-month clock, without the whole operation losing its shape.

The FCA moving away from a fixed annual requirement doesn’t remove the need for a review process. It just moves the hard part earlier, from running the review to deciding when one’s actually needed. Firms who’ve never had to make that call before are about to need a reason for one.

What’s your process today for deciding when a client is due a review, and where would that reasoning live if someone asked to see it?

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