Many of the firms within the ASHL Group advice networks have centralised investment propositions and platform solutions, meaning they have chosen what they're going to use for their various client segments. One of the key advantages of having these in place, is that you don't need to carry out individual client case research. Effectively, they've already been pre-approved for your use with clients.
There's a lot going on about the Consumer Duty within the Group at the present moment in time, in preparation of the implementation date, which is the 31st July 2023. To start with, let’s dissect some of the core rules and objectives of Consumer Duty
The framework will incorporate a Consumer principle, with cross-cutting rules and four outcomes. In this article, we will focus on the rules and outcomes.
Cross cutting rules
The cross-cutting rules, are designed to protect consumers from unfair or harmful business practices. The rules require Financial Planners to:
Act in good faith.
Take all reasonable steps to avoid causing foreseeable harm to consumers.
Take all reasonable steps to enable consumers to pursue their financial objectives.
Consumer Duty Outcomes
Below are the four Outcomes that financial advice firms must achieve as a result of changes brought about by the Consumer Duty.
Products and services
Providers must outline their target market, any risks posed by their products, and provide clear product information. Distributors, i.e, advisers, must do the same and take steps to prevent the wrong consumer types from buying/receiving those products.
Whilst acknowledging that there is some read across between PROD and the Consumer Duty, the FCA stated in more recent, additional guidance that: “compliance with PROD alone is unlikely to mean that a firm is complying with the Duty as a whole”.
The ASHL Group of Companies spends a lot of time with member firms and oversee them while they are getting their advice propositions PROD and now Consumer Duty, ready.
Price and value
Firms need to consider the impact of charges/price, over the lifetime of the product, or services, and check that the benefits to the consumer are proportionate. The FCA’s key concerns around price and value are as follows:
“We are concerned that some clients of financial advisers may be getting ongoing services that do not meet their needs and/or represent value for money”
“That more expensive advice services did not have noticeably different features to cheaper services”
That consideration must be made around charging models with a ‘homogenous one size fits all’ approach
That distributers must consider the total cost of ownership when assessing fair value.
Some customers may end up in high charging and/or low-quality investment solutions due to firms placing them in default solutions that are not appropriate for their needs.
Looking at those four points in isolation, it’s really talking about having detailed client segmentation aligned to a client’s needs.
Firms should communicate in a way that is reasonably likely to be understood, facilitate decision making and take proportionate steps to review and adapt communications.
Firms must not unduly hinder consumers from acting in their own interests, or lead to unreasonable additional costs for consumers, including time costs.
The FCA has also made clear, that “Consumers are at risk of receiving services that do not meet their needs or represent poor value, which may be due to the nature of the service(s) they are receiving and/or the underlying charging structure… We will be paying particular attention to how platforms, wealth management firms, and financial advisers deal with the price and value requirements of the Duty”.
Listen to the original podcast episode now
This blog is taken from an episode of the ASHL media podcast. To listen to the entire podcast episode now, click on the link below.
Find out more
To find out more, we have an Advice Proposition Masterclass hub, which is freely available to subscribers of Sense and Lyncombe Networks. Here you can find a suite of webinars with helpful support on the various aspects of advice proposition development, including a dedicated episode on ensuring that you are prepared for Consumer Duty.
If you are interested in finding out more about the suite of support services available to you as members of the ASHL Group networks Sense and Lyncombe, get in touch today.