Almost a year on from its introduction in July 2023, Consumer Duty has been a wakeup call for wealth and advice firms. To the end of March 2024, the FCA had received over 100 whistleblowing reports alone since the first phase of the implementation in July 2023*.
While it’s clear most Adviser firms have good intentions and put the client at the heart of all that they do, the findings suggest that more work needs to be done in key areas such as client communication, retirement income advice and fee structures.
For industry veteran Dorian Hughes, Business Consultant at Redington – an independent investment consultant providing services across a wide range of UK Wealth managers – compliance with Consumer Duty is very much a focal point.
To support those feeling uncertain about their ability to meet ongoing compliance requirements, in the following points, Dorian outlines three simple practices firms can show which indicate the right mindset as follows:
- Evidence your client stewardship
“Show your working! For most firms it is not their stewardship of clients which needs attention, but rather the provision of the evidence of that stewardship.
“Firms with the right mindset are those that have taken steps to sharpen their pencils in this area; centralising data and information, linking research to consumer outcomes and evidencing their processes with clear governance and oversight.”
- Have clear guidelines on best practice
“Advisers, whether they like it or not, are being given the flexibility to determine what good looks like for them. This will differ between each firm and be driven by unique factors such as their size, product offering and the specific needs of their client bank. When it comes to Consumer Duty compliance, one size does not, and should not, fit all.
“The most progressive firms are those looking to demonstrate compliance to the regulator based on their own best practice and metrics. This could involve bringing in outside expertise – for instance, having an independent consultant to review the FCA’s published rules for the Duty set out in its most recent Policy statements and assess compliance against the specific clauses which are relevant to their firm’s role. We recently carried out this exercise for a multi-billion-pound UK occupational DC Pension Scheme and are rolling this approach out to a variety of UK Wealth clients.”
- Leverage new tech innovations
“Some the most successful firms are extensively using technology to streamline their investment offering. This helps to build scalable and repeatable processes and avoids disparate client outcomes. This is especially relevant in the UK Wealth Management industry which is undergoing significant M&A activity; 30+ private equity backed consolidators have acquired £48bn since 2022 alone and the number of year-on-year announced acquisitions increased over 2023**.
“Powerful web applications that centralise data, research, governance, oversight and consumer outcomes enable firms to quickly demonstrate that they are complying with the rules and delivering the best outcomes for their clients.
“The FCA’s own guidance states that “firms should…continue to make improvements in line with good practice”. As an evolution not a revolution, the Consumer Duty is not a once and done exercise, so we can expect to see more advisers further utilising tech solutions to embrace this opportunity for the benefit of their clients, the industry and broader society.”
*Source Citywire
**Source: NextWealth.
