On 11 June 2025, the Financial Conduct Authority (FCA) introduced the Investment Advice Assessment Tool (IAAT), a structured framework designed to help personal investment firms evaluate the suitability of their advice and the clarity of client disclosures. Building on earlier tools such as the Defined Benefit Advice Assessment Tool (DBAAT) and the Retirement Income Advice Assessment Tool (RIAAT), the IAAT reflects the FCA’s ongoing commitment to improving consumer outcomes under the Consumer Duty.
The IAAT is expected to play a key role in the FCA’s thematic review of the Model Portfolio Service (MPS) market. This review looks at how firms apply the Consumer Duty in the design, delivery, and oversight of MPS offerings, with a particular focus on value, transparency, and client understanding.
Structurally, the IAAT remains closely aligned with its predecessors. It offers a clear, methodical approach to assessing advice suitability, the adequacy of disclosures, and overall alignment with regulatory expectations. When used effectively, it helps firms demonstrate compliance and identify areas for improvement, both in individual cases and across their broader advice processes.
The FCA’s focus on MPS
The FCA’s review of the MPS market highlights its growing interest in how innovation in retail investment products translates into real value for consumers. In a letter to asset managers earlier this year, the regulator acknowledged the rapid expansion of MPS and the increasingly central role asset managers play in shaping and distributing these services.
The review aims to assess how effectively firms are applying the Consumer Duty in the context of MPS, with a particular focus on whether these services are delivering good outcomes for retail investors. The FCA expects firms to have robust monitoring frameworks in place to evaluate the performance of their propositions, ensuring that pricing, value, and disclosures are fair, transparent, and aligned with regulatory expectations. It also plans to highlight examples of good practice to help raise standards and promote greater consistency across the market.
This initiative builds on the FCA’s ongoing work on unit-linked funds and sits alongside broader policy developments, including the Advice-Guidance Boundary Review and the Consumer Composite Investments consultation. Together, these efforts aim to shape a more transparent, flexible, and consumer-focused investment landscape—one where firms are accountable not just for the suitability of their advice but for the outcomes it delivers.
Putting the IAAT into practice
While the IAAT is not mandatory, the FCA encourages firms to use it when reviewing past advice—particularly in response to complaints or during past business reviews. It offers a consistent framework for assessing whether advice was suitable, disclosures were adequate, and the client’s best interests were properly considered.
Firms should also consider how well their current advice and review processes align with the IAAT’s structure and expectations. This includes:
- Ensuring advice is demonstrably based on a full understanding of each client’s needs and objectives
- Reviewing whether disclosures meet the standards set out under Principle 12 and the Consumer Duty
- Identifying and addressing any of the nine examples of unsuitability highlighted in the IAAT
- Testing whether existing monitoring frameworks are sufficient to evidence good outcomes, not just avoid poor ones
The IAAT can also serve as a benchmark for evaluating whether governance and oversight processes are fit for purpose. While many firms already have file review procedures in place, the IAAT encourages a shift beyond technical compliance toward a more outcomes-focused approach that promotes client understanding, confidence, and long-term financial wellbeing.
This shift reflects the FCA’s changing expectations. It is no longer enough to simply avoid poor outcomes; firms must be able to demonstrate that they are actively working to deliver good ones. The IAAT supports this by offering a structured way to assess whether advice processes are aligned with the Consumer Duty.
More than just a compliance checklist, the IAAT helps firms critically evaluate whether their advice is fair, transparent, and focused on the client’s long-term interests. It encourages a broader view of suitability, one that goes beyond technical accuracy to consider how well advice supports client understanding and financial wellbeing.
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Looking ahead
As regulatory expectations continue to evolve, firms that embed tools like the IAAT into their governance and oversight frameworks will be better placed to demonstrate compliance and drive meaningful improvements. With the FCA placing increasing emphasis on consumer outcomes, the role of tools like the IAAT is likely to grow in importance in the months ahead.
For more information on how your firm can make the most of the IAAT, DBAAT, or RIAAT, or if you have any concerns about advice suitability or file review processes, contact Rebecca Prestage.
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