In this series of articles, Chris Jones, Financial Services Director at Dynamic Planner, has been looking at the impact of Consumer Duty, outcome by outcome. In this, his fourth and final instalment, he turns his attention to Consumer Support, highlighting that although this is the last outcome, it cannot be an afterthought.
You’d be forgiven for thinking this one was both the last and the least, because, like me, firms have largely dealt with the outcomes in order – and, as a result, this fourth pillar of the Duty has sometimes got less attention.
But without this one, the rest fall down.
Ensuring the client reaps the benefits
Last month, we looked at the Consumer Understanding outcome, which has significant overlap with Consumer Support. In its pre-implementation consultation on the Duty, the FCA linked the two together.
But if Consumer Understanding is all about making sure the customer knows what they’re buying or holding and what it can do for them, Consumer Support is about making sure they can actually use it.
This outcome requires firms to provide a level of support that meets the customer’s needs throughout their relationship with the firm, enables them to realise the benefits of the products and services they buy, and helps them to pursue their financial objectives.
In other words, you might have selected the best platform and the best product, but if the client comes to retirement, say, and can’t access their money or use the product as intended, you fall down on this pillar.
It doesn’t matter if you’ve achieved the best return for them. The question is, do they have the capability to use the product to achieve their outcomes – first, if you’re there, and second, if you’re not. If you’ve retired, sold your business or pre-deceased them, or if, when you looked at your ongoing service obligations, you decided they didn’t make you enough money and let them go, they still need to be able to use the product as it was intended.
Support can’t be an afterthought
That means, when you’re thinking about the product and investment proposition, the service the client needs – now and in the future – is a key factor.
I’ve talked already in these articles about target markets, particularly with reference to the Products and Services outcome. When you’re establishing target markets, you need to think about each customer’s needs, objectives and preferences. But in Dynamic Planner’s target market tool, we also suggest you think about the type of service they need.
That area has so far had much less focus from firms. As we’ve touched on throughout this series, the service model has historically been one-size-fits-all: ‘This is my service model, I charge X% for it, and if that’s not economical I won’t provide a service at all.’
That’s fine if the product is easy to use: the client may not even need an adviser once they’re all set up. But for more complicated solutions, that’s not the case. Advised portfolios, for example, can be great for business because they make you necessary to the client. But what happens if, for whatever reason, you can no longer provide the service? Factoring that in upfront might change the product decision.
Support needs change
What’s the appropriate level of support throughout the client journey? The focus on ongoing advice already has firms examining this question, and over time we might expect service models to change accordingly.
As we all know, there are times when clients need you less, and times when they need you more. Current fee structures – particularly those based on assets under management – don’t reflect that.
If I ran an advice firm, I’d be thinking about it this way: How do I charge the right amount of money for young clients? How do I stay in touch and keep the client informed, so they can make the right decisions when I’m not providing an ongoing service? And how do I make sure I’ve got the capacity, both financially and timewise, to be able to look after them at the end of the cycle – because I won’t be absolved from the support outcome just because I can’t do it profitably.
Cheap – but at what cost?
When we talked about the Price & Value outcome, I highlighted the risk of a race to the bottom on fees. There are lots of reasons why simply being the cheapest doesn’t mean you’re delivering value, but a particular one is the threat to the Consumer Support outcome.
The focus on cost has led to many firms offboarding their low-value clients – and therefore withdrawing their support. Depending on the investment propositions for those clients, and how easy it is for them to self-service, there could be trouble ahead for firms that have taken this route.
Another potential concern is that firms get so cheap they simply can’t survive. From a Consumer Duty perspective, it’s vastly preferable for the client to be able to count on long-term support, even at slightly higher cost , than it is for firms to keep shaving away basis point after basis point on fees and then collapse.
Legacy providers are an industry challenge
If you’ve read this far, there’s a high likelihood that you’re saying, ‘I’d love to meet the Consumer Support outcome, but it’s not easy.’ The reason? Legacy providers.
Online forums are full of frustrated posts by advisers facing issues that come from within the financial sector. Providers set up products to be used in certain ways, but today those companies are no longer around or have undergone several waves of consolidation. Advisers are struggling to get money out of trusts or to get valuations for their clients, with often Kafkaesque admin hurdles to overcome.
Unsticking this sticking point is essential to getting clients the outcomes they were led to expect. Let’s hope pensions dashboard and the increased regulatory focus on open finance will drive some progress.
Rounding up
That brings us to the end of the series. But the impact of Consumer Duty is just beginning to be felt. This regulation introduced a new regulatory principle: as such, it’s designed to be all-pervading. Today, two years on, we’re starting to see how it might redraw the industry map.
Given that the FCA is following through on the commitment to ground future regulation in the Duty, it’s clear advice firms have little alternative but to align their businesses accordingly. The challenge to providers to get their houses in order is legitimate, but firms need to make sure of the ground from which they’re throwing stones. Many are seizing the opportunities of the new regime, so don’t risk becoming an outlier.
About Chris Jones
CHRIS JONES is Financial Services Director at Dynamic Planner. He is responsible for Dynamic Planner’s Investment proposition and ensuring that users are able to match people to suitable solutions in the Dynamic Planner system. He leads Dynamic Planner’s 14-strong team of analysts and qualified investment professionals. He has more than 30 years’ industry experience and as both a Chartered and Certified Financial Planner, brings a key financial planning and client perspective to the business.
