Nearly half (44%) of financial advisers expect profitability to decrease due to complying with the Consumer Duty rules, according to research from Quilter.
Some 46% expect it to stay the same and 5% believe their business will be more profitable.
Quilter’s research also found that just below a quarter (24%) of financial advisers expect their turnover to decrease. Two thirds (63%) believe it will stay the same, whereas 8% expect turnover to increase.
When asked about the estimated cost of complying with the regulation, the average cost reported by advisers was £18,161 ($23,328,€21,165), with a median of £7,500.
Those in a network anticipate a cost of £15,076. Directly authorised advisers expect costs of £19,934.
Fees likely to increase
The research also found that expected costs vary depending on the size of the firm. Sole traders expect a cost of £4,925 to comply, compared to £93,325 for firms with 21 advisers or more.
For a mid-sized firm with between six and 10 advisers, costs were expected to reach £20,208. Two directly authorised financial advisers stated that their costs to comply with consumer duty would exceed £500,000.
Almost a third (32%) of advisers said that customer fees were likely to increase as a result of the regulations.
John Kerr, advice recruitment director at Quilter Financial Planning, said: “The consumer duty is a landmark piece of regulation and has the potential to alter customer experience for the better from day one.
“With the rules coming into force today, it is important that financial advisers have their systems and processes in place and that these have been communicated across the firm.
“Clearly there has been a cost implication for financial advisers and they have fears about what this will do to turnover and profitability. However, advisers should seek support externally. Looking to outsource elements of the value chain can ease the ‘heavy lifting’.
“The Consumer Duty needn’t be a drag on your business. Cleaning up and tailoring the customer experience can be a great way to not only increase customer satisfaction, but also prompt positive reviews and referrals.”
