Preparing for a file review: a practical plan for advice firms

The email arrives: your network, a compliance consultant or the regulator wants to look at a set of client files. The natural reaction is to open the files you expect them to choose and tidy them up. That rarely works. The reviewer chooses, and the files that cause trouble are usually the ones nobody has opened for a while.

Preparing for a file review is far easier when it is not a scramble. This guide sets out a practical plan: what reviewers look for, how to check your own files first, how to run remediation, and how to show that what you changed made a difference.

Who reviews advice files, and why it matters

Files are reviewed by different people for different reasons, and the preparation is broadly the same for each:

The FCA's current Consumer Duty focus areas for advice and wealth firms include "Risks to providing unsuitable advice" and "Tackling poor identification of clients with characteristics of vulnerability by wealth managers" (FCA Consumer Duty focus areas). Expect any file review to look closely at suitability and at how vulnerability was spotted and handled.

What reviewers look for in a file

Whoever does it, a file review tests whether the file shows sound advice and orderly records. SYSC 9.1.1R requires records "sufficient to enable the FCA to monitor the firm's compliance" (SYSC 9.1). In practice, that means:

• client information that covers knowledge and experience, financial situation including ability to bear losses, and objectives including risk tolerance (COBS 9A.2.1R);
• a suitability report that explains why the recommendation is suitable and sets out its possible disadvantages (COBS 9.4.7R);
• charges disclosed and agreed (COBS 6.1A), with any ongoing service and the right to cancel it without penalty explained (COBS 6.1A.22R);
• evidence that the ongoing service the client pays for was delivered, including a suitability review at least annually where the firm provides a periodic suitability assessment (COBS 9A.3.9R);
• any characteristics of vulnerability recorded, with the adjustments made, in line with the FCA's guidance on vulnerable customers (FG21/1).

Our compliance file review checklist breaks each of these into the specific documents and points to check.

Preparing for a file review: a six-step plan

1. Map the back book

List your clients by advice type, adviser, date of advice and service status. Mark the higher-risk groups: pension transfers, clients with characteristics of vulnerability, newer advisers' cases, and ongoing service clients with no recent review. You cannot prepare for a sample if you do not know what the whole looks like.

2. Agree the standard you will check against

Write the standard down. Separate the FCA requirements from your own file-quality standard, so a reviewer can see you know the difference. If the checklist changes, date the new version.

3. Review your own files first

Check as many files as you can against that standard, not only the ones you expect to be picked. Start with the higher-risk groups. Record each finding with the rule it engages and the evidence for it.

4. Sort findings by severity

• Suitability concerns: the advice may not have been suitable. These need senior review and may mean contacting the client.
• Disclosure gaps: charges or services not properly explained or agreed.
• Missing evidence: the advice may be sound but the file cannot show it.
• File quality: naming, order, duplicate versions, illegible scans.

5. Remediate and record

Assign every finding an owner and a date. Never backdate or rewrite historic documents. Where something was missing, add a dated file note explaining what has been done now. A reviewer will respect an honest, dated remediation trail far more than a file that looks suspiciously perfect.

6. Look for patterns

Ten files with the same gap is a process problem, not ten file problems. Fix the template, the checklist or the training, then check a later batch of files to see whether the fix worked.

Showing that your fixes improved outcomes

Under the Consumer Duty, firms must "regularly monitor the outcomes retail customers receive" from their products, communications and customer support (PRIN 2A.9.8R, PRIN 2A.9). File reviews are one of the most direct sources of that evidence for an advice firm.

The FCA's outcomes monitoring good practice review says firms should show "What their information tells them. How they use it to identify risks or issues. What action they take in response." and "How they consider whether those actions have improved outcomes." Among the areas for improvement it lists no evidence of how MI leads to decisions and improved outcomes, and a lack of testing for remedies.

So keep a simple log that a reviewer can follow:

1. What the file reviews found, in numbers and themes.
2. What you decided to do about it, and who decided.
3. What changed: a template, a process, training for an adviser.
4. What the next round of reviews showed.

That log also feeds your annual Consumer Duty board report. See our guide to the Consumer Duty board report for how to link MI to outcomes.

On the day, and after the review

On the day

• Have files complete and in a consistent structure, so documents can be found quickly.
• Make sure scanned documents are legible and meeting notes are filed with the right client.
• Prepare a short summary of your own monitoring: how many files you checked, what you found, what you changed.
• Brief advisers on their cases so they can explain the reasoning behind a recommendation.
• Answer questions directly. If something is missing, say so and show the remediation record.

After the review: remediation that sticks

When the findings arrive, treat them the same way as your own: owner, date, root cause, re-test. Compare the reviewer's findings with what your own checks found. Where they found something you missed, change your checklist so you catch it next time. Where your own checks had already found and fixed an issue, that is evidence your monitoring works.

Checking every file, so preparation never starts from scratch

The single biggest constraint on preparation is time. By our estimate a thorough file review takes half a day by hand, so firms check a sample and the rest of the back book goes unseen.

Scrutineer reads a whole client folder, every subfolder and scanned document included, and returns a compliance score, a file-quality score against your own standard and a verdict of Suitable, Unclear or Unsuitable, with every finding tied to a named FCA rule and the supporting passage quoted. It lists outstanding actions and missing documents, compares review periods so you can see a file improve after remediation, and flags any review that could only read part of a folder. By our estimate, that saves about three and a half hours a file. Your compliance team still decides every finding and signs off the remediation.

Frequently asked questions

How far ahead should we start preparing for a file review?

Ideally you are always prepared, because your own monitoring checks files continually. If notice arrives, start with the highest-risk groups in your back book and work outwards.

Should we correct old documents before a file review?

No. Never alter or backdate historic documents. Add a dated file note setting out what was missing and what you have done since. An honest remediation trail is evidence of good control.

What is the most common reason a file fails a review?

Often the advice may be reasonable but the file cannot show it: a suitability report that does not explain why the recommendation fits, missing capacity for loss reasoning, or no evidence of the ongoing service. These are evidence gaps that a consistent checklist catches early.

See how Scrutineer checks a whole folder in minutes, or book a twenty-minute demo on Microsoft Teams with Adam Booth, run live on a demo firm with nothing to prepare.