With the FCA’s new consumer duty requirements coming into force on 31 July, IFA Magazine, in conjunction with Legal & General, decided it would be a great time to carry out a reader survey to gauge attitudes and preparedness ahead of the changes.
The aim of the survey was to find out how well-prepared advice professionals are for the significant regulatory change which is about to impact, particularly considering the ongoing cost of living crisis too. Whilst many of our findings give confidence that firms have Consumer Duty preparations firmly under control, for the minority of advice firms, there is still work to be done in order to ensure compliance with the new rules happens in time.
What are the biggest challenges you face in 2023?
Financial advice professionals are all too familiar with working in a frequently changing regulatory environment. However, this year’s new Consumer Duty looks set to add yet a further layer of processes, checks and controls to busy advice businesses. Indeed, survey respondents told us that regulatory change is one of the biggest challenges which they face – with almost 73% citing it as one of their top three challenges.
Another notable challenge for advisers, which is tied in with this theme, is keeping up to date with compliance, with almost 48% of respondents including it in their top three challenges.
When it comes to the business of advice, servicing existing clients and increasing business efficiency were high on the list of challenges for many respondents too as they do their best to make sure that clients’ needs are satisfied and that the whole operation can run smoothly.
Interestingly, finding new clients did not seem to present a particular challenge for respondents, with only 17% including it in their top three.
Also, the challenge of justifying fees to clients is similarly not seeming to be presenting many problems, with just 11% referencing it.
When we think back ten years ago, to the changes brought in via the RDR, the challenge of justifying fees was then largely seen as significant as advisers’ remuneration moved from a largely commission-based model to one based on adviser charging. It’s encouraging to see how, in today’s market, the charging of fees has become embedded in good practise and is benefitting both clients and firms alike as a result of greater transparency.
Are advisers well prepared for the new consumer duty rules?
We have very good news to report here. On the basis of our survey data, the picture looks extremely positive with the vast majority confident that they will fulfil the new objectives. Almost 19% of respondents reported that they are already fulfilling the objectives of the new Consumer Duty rules and a further 73% feel confident that they will be ready for the new rules coming into effect. This leaves less than 8% who do not anticipate being ready for the changes by July and just 1% who were not aware of the rules.
What further help do adviser need to prepare for consumer duty?
We asked our readers to identify particular aspects which they felt might help them to be more prepared for Consumer Duty. There were many different areas identified as shown in fig 2. Guidance on the changes, greater resources and leadership, as well as updated client literature all featured strongly. For those advisers not already confident that they’ve got their preparations organised, there is clearly urgent work to be done in a relatively short space of time in order to comply with the new rules and avoid redress.
Survey respondents told us that regulatory change is one of the biggest challenges which they face – with almost 73% citing it as one of their top three challenges.
Which sources do advisers use for keeping up to date with the latest industry news, like consumer duty?
Overwhelmingly, it seems that trade publications such as IFA Magazine feature heavily, with over 86% of respondents telling us that this is where they get their information. Other useful sources identified were via peers in the industry, from LinkedIn and from podcasts.
How is today’s cost of living crisis impacting advisers and their clients?
With double digit inflation, more and more consumers’ budgets are coming under pressure from rising prices. We were keen to find out where these changes were impacting the advice process. The majority of respondents (51%) told us that it was changes in consumer habits that which they have identified as the biggest impact.
Interestingly though, almost 20% of respondents identified greater focus on retention and communicating the value of protection as a result of the economic pressures people are under, with pressure on family budgets sometimes leading to difficult decisions about items of expenditure.
Richard Branson once said that “Business opportunities are like buses, there’s always another one coming.” When it comes to the financial advice profession, this certainly seems to be the case in 2023. When we asked our readers what they believe is the biggest opportunity facing them in the year ahead, more than 55% of respondents identified greater recognition of the value of advice as the clear winner. With the financial world becoming increasingly more difficult for consumers to navigate, it seems clear that the value of having sound, impartial financial advice from a trusted adviser cannot be overstated.
About the survey
The survey was carried out online between 30th March and 6th April, with a total of 96 respondents.