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Consumer duty - unintended consequences?

Journalist: Jane Matthews, FTAdviser

ended 16. May 2023

Hello financial advisers, 

The results of a survey being released this week have shown that a significant number of advisers are saying they do not feel prepared for the consumer duty live date in July. I'm interested to hear where you are with it, do you feel like your firm is ready to go? 

Related to this, the same research has also shown that a large amount of advisers have said the consumer duty will prompt them to move lower-value clients out of legacy products into new lower-cost products.

While this is the outcome the FCA intended, there are signs of some unintended consequences with a large amount of surveyed advisers saying they have increased their minimum portfolio value for new clients. Likewise, a lot have also increased, or will increase, their charges for lower-value portfolios due to the extra work required by consumer duty.

Are these changes you have made or have you kept your charges and minimum portfolio value the same? 

Many thanks, 
Jane

3 responses from the Newspage community

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Editor
Wes Wilkes
CEO at IronMarket Wealth
Consumer duty has already added an extra layer of cost, complexity and oversight to our compliance management. As there have been clear target dates for the FCA with demonstrable outputs required, it is worrying that some firms don't feel ready.
For what it means to clients, we feel we're ready, and many of the day-to-day activities we carry out such as our robust client feedback process plays into the framework of the duty very well.
The impact is inevitable and clear, clients with lower perceived value or simpler requirements, will either find it difficult to obtain the services they need or will only have access to a 'lighter' service as firms attempt to asses and order their value measure appropriately. Some people will be 'priced out' and this is a sad consequence.
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Luke Thompson
Director at PAB Wealth Management
As ever with the FCA the consequences of the actions they take are never fully thought through.

I have a definite opinion that this will create further barriers to client's with smaller pots getting the financial advice that they require. For customers with small pots it will become difficult to service their needs. As a firm we charge £1,495 for initial advice that we provide but for someone with a smaller pot of say less than £50,000 this advice fee will feel disproportionate.

In the past, we may have reduced our fee for these smaller pots to give people the advice that they need. However, it appears that Consumer Duty will bring an end to this and with this in mind we may not be able to help these customers who perhaps need advice the most the help that they need.
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Gary Bush
Financial Adviser at MortgageShop.com
To read that some advisers are quoted as saying they "do not feel prepared" for Consumer Duty doesn't sit well with me at all - I'd question how many rounds of golf they have had over the past 12 months. This isn't a situation that has suddenly been thrown on the industry it's been brought to market quite effectively and with plenty of noise from supporting providers. To further read that advisers are prompted to move lower-value clients away from legacy products and into new low-cost examples really does make the point of Consumer Duty on the investment market. Advice firms need to adopt a new way of thinking for the smaller client investments, in our mind this makes for perfect handling in an online and lighter touch environment where you can match the work being undertaken by advice firms by the size of return.