One in twelve wealth managers won’t meet the Financial Conduct Authority’s consumer duty board report deadline with fines set to rise, according to new research from Ortec Finance, a global provider of risk and return management solutions for professional investors.
The survey was conducted during April 2024 by independent research company PureProfile which interviewed 50 UK wealth managers and financial advisers.
It revealed a significant number of wealth managers and financial advisors, (8%) are fearing their company will not meet the 31 July 2024 deadline.
The primary reasons include an inability to provide sufficient evidence of Board engagement with Consumer Duty and incomplete reviews of their approach to vulnerable customers, including assessing whether customer support meets these clients’ needs.
Other reasons cited are inadequate reviews of internal governance processes and policies, incomplete staff training, and insufficient evidence of identifying potential consumer harm.
Tessa Kuijl, managing director global wealth solutions at Ortec Finance, said: “The FCA’s Consumer Duty Board report deadline is fast approaching, and our research highlights that some wealth management and financial advisor firms still have work to do to meet the deadline. It’s concerning that so many wealth managers and financial advisors doubt their ability to meet the deadline.”
In addition to these compliance challenges, the study also found that wealth managers and financial advisors expect an increase in industry fines for non-compliance over the next three years. Eight in ten (78%) of those surveyed anticipate higher fines, while nearly three in four (74%) foresee increased investment in technology to help address regulatory demands. Specifically, 35% expect a dramatic increase in technology investment.
The main reasons for this technological investment are to deliver better client service, develop a better understanding of a wider range of asset classes, improve investment advice, and reduce costs. Addressing the growing focus on regulation is also a significant driver for this increased investment.
Kuijl added, “As wealth managers and advisors foresee a rise in fines due to heightened compliance, many are turning to technology to better navigate these regulatory requirements. Investing in the right tools and systems is crucial for protecting both the firms and their clients.”
