FCA File Checking: What Should Be Reviewed in an Advice File?

The FCA are notoriously vague on details when it comes to what “perfect” looks like to them. You see the problem for a regulator is that while they set the standards. As soon as they offer up a perfect mannequin, hey-presto, every case is a copy mannequin. They do not like to lead, or be didactic in their requirement. Once I lived in a picturesque listed terraced cottage in the Cotswolds. They did not like the colour of our door, so an enforcement letter asked me to change it to match the other doors. Of course every other door was white, and they got me to paint my door white – without ever saying the word, “white”. An amusing exchange of letters, sits in my archives. It is in the nature of regulation – cajole and persuade, in the negative and guide with a stick. Of course this makes our job as IFAs where our advice service is regulated, just so much harder.

Suitable, unsuitable and unclear: how FCA assessments have changed

There have been two strands emerging from this. Firstly firms who have been under the microscope of the FCA have developed an approximate template for themselves. These of course do not match exactly, but in general they rhyme, and if you follow their templates, the files roughly fall into three categories, of suitable, unsuitable and unclear.

These three categories have been in common useage since the 2006 Pension review on switching, and were used in the 2016 FCA Post RDR Industry Review. The FCA reviewed 1,142 advice files from 656 firms and assessed them against the Conduct of Business Sourcebook (COBS). They published their findings, FCA Assessing Suitability Review but it is not exactly an easy read, and many commentators at the time were astonished to find that FCA claimed 93% suitable advice, when in fact 42% of the files were also deemed deficient of information or material in one way or another (usually classified generally in the compliance industry as “unclear”). Of course they allowed most of those 42% of files that missed some key documents to pass as presumed suitable, since disclosure is only a part of suitability, and not suitability itself. Still with me? Checking other people’s files and drawing conclusions from what is a record of a conversation, is not the easiest activity, and it gets worse!

The FCA Investment Advice Assessment Tool

The three advice outcomes of Suitable, unsuitable and unclear did not make it into the filechecking template or commentary for the next round of FCA thinking. In 2025 The FCA issued further file checking guidance. This is embedded in a document called the FCA Investment Advice Assessment Tool (IAAT) and is located here

FCA Investment Advice Assessment Tool (IAAT)

It is at pains to avoid calling itself a suitability checker, rather the FCA describe it this way:

The term UNCLEAR IS actually abolished. In fact, the document seems to make mincemeat of its own 2016 review. In that last review (the only industry wide review ever conducted) they found 42% of files lacking information. But in 2025 the FCA say:

So if you used this 2025 template against the 2016 RDR review findings, then you are left with a very uncomfortable number – that 49% of files were not just unclear, but actually unsuitable in 2016. Perhaps that is why the FCA scrapped the planned follow up Review.

What should be reviewed in an advice file?

This is a slight diversion to the question of “What Should Be Reviewed in an Advice File?” but it helps sets the scene for apparently concrete lists of requirements that soon fall away under challenge into subjective judgement templates.

The requirements are embedded in COBS, the conduct of business sourcebook. These are the rules, as far as they are written down. Seasoned commentators will show you that the FCA keys lie in principles, and that the 12 principles for business effectively act as the benchmark of what goes, and what doesn’t go. Back to 2016 and the FCA published a list of requirements under the following headings,

FCA guidance on assessing suitability

It looks by comparison today in the post consumer duty era to be a somewhat vague statement of requirements, and has been overtaken by industry who use much higher standard and more detailed assessment of files and suitability reports.

How Consumer Duty has changed file checking

Rather than simply following processes and demonstrating procedural compliance, firms must now actively deliver good outcomes for retail customers, or rather in the way that compliance adds a further dimension to any activity, we must now SHOW how we have actively delivered good outcomes.

Consumer Duty is intended to become embedded within your day-to-day operations - and we must show this on request.

For advice firms this means being able to evidence in the advice files:

You can no longer assume good outcomes are embedded, in the old days this was by measuring the lack of complaints, or some survey or other conducted on your clients, or the feedback file, full of loving letters from happy customers. You've now got to get on the front foot and be able to prove what you are doing. Networks and Nationals have changed and are far more proactive today.

In a stroke, file-checks has become one of the most important Consumer Duty controls available to firms.

The FCA's own advice assessment and disclosure review templates provide a strong indication of the regulator's expectations, but it is never easy for the regulator even when it wants to get didactic. For a variety of reasons that I never have fully understood, they simply will never tell you what exactly to do, or how to do it, even informally in private chat, stepping back and saying when challenged, “how you do that is for you to decide...”

Notably in all the documents and papers reviewed for this article, the FCA never once mention the one word that is probably used more than any other word in an IFA or mortgage broker’s office: FACTFIND!

The word factfind is not mentioned once in the extensive FCA rulebook. They call it “information gathering” today, and previously called it KYC, or know your client.

The closest that we get to the FCA telling us exactly what they want is in this text:

"We are publishing the IAAT to help firms understand the methodology we use in our file reviews of investment advice"

FCA Investment Advice Assessment Tool (IAAT) But even this text is covered in copyright protections, and it can only be used by the industry under a licencing agreement, which means restricted access, and only where "any reproductions of the IAAT will be marked with a notice in the following terms:© Copyright FCA 2024"

It is almost as awkward as those HM Customs copyright protections on passport photocopies, observed only in the breach!

The FCA’s information-gathering questions

There is a whole raft listed of closed end yes/no questions for file checkers to use when reviewing a file.

It’s a blunt tick box exercise, and it develops, asking the checker to provide a

REASONS WHY the FILES FAIL, according to 2025 paper

FCA Investment Advice Assessment Tool (IAAT)

The key reasons for failure may give you key clues as to what to checkers should review, and I summarize these below:

The three principal areas assessed by the FCA

This all feeds into THREE key boxes for the results summary:

It sort of works, but somehow the document is only a guide, and, as they say themselves, should not be used as the key checker document. So we are back to designing our own.

What information must advisers collect under COBS 9?

The real source for an answer of what should be reviewed in an Advice File lies in COBS9, and more particularly in the industry interpretation of the same. COBS 9 – Suitability Requirements is the core FCA Handbook section governing advice suitability.

The suitability rules require advisers to gather up a fact find including all the following:

so a lot of yes no questions to be answered about the file. Has the adviser

What should appear in a suitability report?

Then there is another section COBS 9.4 – Suitability Reports. This section can be useful because it sets out what must appear in a suitability report. The FCA states that a suitability report must:

A file checker should review whether the suitability report contains:

So much for FCA who are the final arbiter, but file checkers know there is more to do and say on a file. Our compliance partner IFAC use a detailed assessment template, and give brief feedback to advisers, both when files are suitable, and when they fail and when unclear.

What do IFAC say?

What does a good file look like? Following COBS 9.2.1

Filechechers in general follow the following headers / headings

Any missing items are immediately identified, and this forms the basis of what is going to be checked for actual suitability. If the item is missing, then frankly there is no point proceeding and checking the suitability of the file. BAT call this the COMPLETENESS check.

The BAT advice-file checklist

In more detail the BAT AI filechecker system looks quickly for

Client Agreement

AML

Disclosure

And then it strips out the FACT FIND FF into hard and soft facts.

1. FF Hard Facts

Personal Information

Are there sufficient details surrounding the client's personal information to allow a recommendation to be made?

Financial Information…

Are there sufficient details surrounding the client's financial information to allow a recommendation to be made?

Does the factfind FF contain sufficient information on Income and Expenditure (current and future where applicable), Assets, Liabilities?

2. FF Soft Facts

Help support the recommendation

Is the FF Uptodate with correct client details?

E.g. Details of other plans, cash holdings

Ideally broken down, or if not broken down, sufficient notes to ensure clear FF, that means

And as for the Planned Retirement Age

Assets and Liabilities

And we come to

And

BAT AI filechecker looks at

RISK

Attitude to Risk

Capacity For Loss

Existing Plans

Is there documentation on file detailing full ceding scheme information?

New Plans

Software use

Cashflow

Scenario Planning/Stress Testing

Centralised Investment Propositions (CIP)

Flowchart? Decision Tree? Matrix?

CIP

Dated and discussed with client prior to application

SR

SR

SR

SR Reasons Why

SR

Any recommendation MUST be driven by the adviser based on what they believe to be the most suitable advice for the client, rather than simply facilitating a desire

Disadvantages and Risks

FILE CHECK COVERS....

FILE CHECK ERRORS:

Why advice file checking is complex

If like most IFAs and brokers, you are astonished at the amount of information that is checked by compliance and needs confirmation and checking, and maybe have speed-read the above requirements, then you will reach the same conclusion. It is complex and subjective, it takes time and energy to check files.

How Consumer Duty raises the standard

The key for BAT is the Consumer Duty that is sweeping change and increases the amounts at stake… also known as “upping the ante” the standards have risen for advisers, and a chill wind awaits those who haven’t changed. Due diligence audits are standard fayre now for firms selling up, joining other organisations or seeking to grow. Expect in these cases to see all your files put through a BAT auto file check review using AI to extract key trends.

Why traditional file sampling is no longer sufficient

The FCA's New Direction Means file checking is no longer about sampling perhaps 1% or 20% of files. Although the FCA has committed to becoming a "smarter regulator" and reducing unnecessary regulatory burdens, it has simultaneously reinforced that Consumer Duty sits at the heart of how firms deliver good customer outcomes, and that means more checks, and more requirement for evidence, outcomes monitoring consistency. It takes the filechecker some two hours to work through a full file check, so the economics increasingly point to using AI for file checking.

This shift will fundamentally change the oversight over the next five years, and introduce a higher standard of care for regulated firms.

A firm reviewing only 10% of advice files cannot confidently conclude that the remaining 90% to 95% delivered good customer outcomes. The larger the adviser population, the greater this risk becomes. With only 50 advisers, a firm can expect two cases per week per adviser, so that will rapidly increase to

And with a 10% sample they would previously review only 500 files, and leave 4,500 cases untested. This cannot continue.

While the FCA has not explicitly mandated 100% file reviews, the direction of travel is becoming increasingly clear, and pre-sale filechecking means taking risk off the table.

The role of AI in advice file checking

Technology is changing this equation by making this cheap and affordable, and with that it becomes close to a necessity. AI can cope in realtime withal the following that hitherto took months to achieve…

AI-assisted review systems can help firms analyse:

Most importantly, AI-assisted review can help identify risks across entire adviser populations rather than isolated samples. It does not remove the need for human oversight, and if using the BAT system we achieve this with a simple “escalate” button to request filechecks.

Compliance professionals can therefore focus their expertise on higher-risk cases and complex judgement areas.

AI-supported review with human oversight

The future is unlikely to be AI replacing compliance reviewers, it will be AI identifying risks and humans making regulatory decisions.

Continuous quality monitoring using AI-assisted review capabilities, ultimately gives the ability to assess 100% of advice activity in order to provide compelling evidence that good customer outcomes are being delivered consistently across the business.

Sources

• FCA: Assessing Suitability Review Findings from the FCA’s review of pensions and investment advice files.
• FCA: Investment Advice Assessment Tool (IAAT) The FCA’s methodology and supporting information for investment advice file reviews.
• FCA: Assessing suitability FCA material covering know-your-client information, research, due diligence and recommendations.
• FCA Handbook: COBS 9 — Suitability The FCA Handbook chapter setting out suitability requirements.