Spending on new technology is the biggest driver of increased investment by adviser firms ahead of the implementation of Consumer Duty rules coming into effect from July 31st 2023, new research* from growing SIPP provider iPensions Group shows.
Its study found more than three out of four (76%) of firms have seen their costs rise as they prepare for the new rules which aim to increase consumer protection and promote fair practices in the financial services market.
The increased investment in their businesses comes from a combination of one-off and ongoing costs with 69% estimating they are facing one-off costs while 72% say the rise in costs will be permanent. Just one in six (16%) say preparing for the implementation of Consumer Duty has had no impact on their cost base while one in 12 (8%) were unclear on the financial impact on their businesses.
Investment in technology has had the biggest impact on costs – 67% highlighted spending on technology while more than half (55%) say they have spent on improving their existing data. Just over one in three (34%) say they have invested in recruiting staff while 38% have spent on segmenting customer databases.
There are some concerns that partner firms are not as well-advanced in preparing for Consumer Duty – around 38% say they are concerned about the issue. However, 59% are confident partners are well-prepared.
The study asked advisers what the impact of Consumer Duty on charging will be given that the Financial Conduct Authority’s expectation is that firms should provide fair value. Around a third (34%) of those questioned said advisers already offer fair value.
More hybrid charging is seen as the most likely outcome with 58% of firms saying Consumer Duty will mean a range of charges for different services while 56% expect it will lead to advisers revising fee structures. Just 43% believe it will lead to greater transparency.
iPensions Group Managing Director Craig Cheyne said: “Our study shows that adviser firms have invested heavily in preparation for Consumer Duty underlining the commitment to its success from the industry.
“Clients are demanding increased use of technology and that is reflected in the study which shows that is the area which firms are addressing ahead of improvements to data.
“We are focused on delivering transparent service in a timely manner and have been investing in innovative technology to meet the demand from advisers and their clients.”
iPensions Group’s growth strategy is driven by technology enabled products and solutions as it continues to deliver innovation in the SIPP market following significant investment in technology.
It offers a full range of SIPP services through the adviser market with its range of SIPPs including the Adviser SIPP, Platform SIPP, USA SIPP, and its Irish Transfer service.