This week marks the one year anniversary of the Financial Conduct Authority’s consumer duty, but what have advisers learnt from the new rules?
Aimed at promoting fair value and good consumer outcomes, advisers reflect on what their firms have learnt from the regulation as we reach this milestone.
Positive for the industry
The legislation has been a “net positive” for the industry, according to Alan Smith, chief executive of Capital Asset Management.
He said: “Consumer duty has forced some companies to review their procedures, pricing and service models.
“It’s clear that a number of the larger firms had been charging ongoing fees without providing a comparable service to clients in return - and that had to stop.
"Despite the short term pain for the companies affected, it is likely to lead to a more professional advice sector in the years ahead - to the benefit of advisers and clients alike.
“The FCA should be congratulated for launching the initiative, and more importantly, following through on it.”
Cost to serve
Lisa Meller, IFA at Personal Finance Movement, said one of the main things that became clear was that, particularly during the cost-of-living crisis, clients were very cost conscious.
She explained: “In order to provide both fair value with reasonable prices and ensure clients have all the information they need to make informed decisions, from the very start of operations, Personal Finance Movement decided to provide fixed fees which are published and available to see on our website.
“We found that this is an extremely helpful tool for clients and very welcomed by them and as such a great way to operate within the consumer duty.”
For Caroline Hawkesley, UK managing director at Progeny, one of the learnings that came from the firm’s cost to serve analysis was that the cost of delivering quality, professional advice with the required robust governance and controls in place remains high.
“While we continue to drive efficiency via technology and the streamlining of processes, it really centres around the value and level of professional standards that the client receives for that cost.
“Learnings from an initial survey around what clients value also revealed that the top three drivers were personal connection with their adviser, tailored advice and quality of customer service and support, with cost coming in lower as a perceived driver of value.
“This validates what we have always believed about professional financial advice, but it remains the case that the industry needs to get better at articulating and promoting the benefits within the marketplace,” she added.
Toby Band, financial planning director at First Sentinel Wealth, said the firms fee reduction has helped “reduce friction” and to take on extra assets this year compared to the previous year.
“Interestingly, the feedback from potential clients is that our initial fees are lower than other firms they may be speaking to, but from our feedback received the quality of service we are providing is greater,” he explained.
