The Financial Conduct Authority (FCA) is looking to drive a “fundamental shift” in customer protection standards in the financial services sector with the Consumer Duty, and it is understandable that the changes are getting advisers a little worried.
M&G Wealth recently surveyed over 200 advisers and found 73% are concerned about the forthcoming Consumer Duty rules and guidance, as 7% said they are very concerned.
In terms of impact to their suitability advice process, over two-thirds (68%) said that they will need to wait and review it when the final rules are out, with a quarter (25%) believed it is likely to result in little change at this stage.
Just 1% predicted it will mean a whole review of the suitability advice process and significant changes, and a further 5% said they don’t know what impact it’ll have.
In terms of the collection of management information to assess client outcomes, over half (55%) admitted they collect very little or that they collect some but with no consistent process. Some 36% said they regularly collect and review client outcome data.
Big changes ahead
Vince Smith Hughes, director of specialist business support at M&G Wealth, said: “With the FCA not expected to publish the final Consumer Duty rules and guidance until 31 July, it’s unsurprising that many advisers are waiting to see the contents to understand what impact it will have on their suitability advice process.
“What we do know, however, is that it is a set of ‘cross cutting’ rules on how firms should act to deliver good outcomes for customers and provide greater clarity on the expectations required, with governance for products and services, price and value, consumer understanding and consumer support.
“Its impact should not be underestimated. If you take the FCA estimate of cost to the industry a guide, the total one-off direct costs for firms to comply is expected to be in the range of £688.6m to £2.4bn ($2.97bn, €2.83bn) – and the ongoing annual direct costs to be in the range of £74.0m to £176.2m. That’s an average of between approx. £13,500 to £47,000 per firm as a one-off and around £1,450 to £3,450 annually, appreciating, of course, some firms will pay much more than others.
“Across the industry, it’s time to seriously start looking at our processes and consider the impact of the new standards. Although the implementation period is proposed to run until 30 April 2023, the FCA has stated that, during this interim period, progress towards compliance with the new rules is expected to be demonstrable when asked.
“One thing’s for certain, the new rules are going to bring big changes and it’s important to get ahead of the curve.”
