According to the firm, the price and value outcome appears to be the biggest challenge many advisers are facing in their preparation for the consumer duty.
In the latest video in the firm’s consumer duty series, released last week (February 17), Paradigm’s head of consultancy, Graeme Stewart was joined by the firm’s director of mortgages, Richard Howes, and director of protection, Mike Allison, to discuss this outcome.
As part of the price and value outcome, firms need to ensure that the price a customer pays for a product is reasonable compared to the overall benefits that the customer gets from the product.
When addressing this outcome of the consumer duty, the Financial Conduct Authority has suggested that firms ask themselves three key questions.
Addressing the question of different pricing for different groups, Paradigm’s Allison said the key driver is that the charge should be driven by the cost to deliver the advice.
Howes gave the example that in the case of a mortgage, two consumers may require to borrow the same amount, but where one is taking an offset mortgage, for example, that consumer would require more hands on advice and thus the charging structure would be different.
“The point is, there is no cross-subsidies, people pay for the advice they get and the cost is driven by the cost to provide that advice,” Allison said.
In relation to the data firms use to monitor the fair value of its products and services, Allison said it will depend on a firm’s size as to how regularly they do this.
“Some firms might want to do it quarterly or half yearly, what actions they take will be documented in the senior management meetings and the consumer duty report which obviously has to be produced annually,” Allison said.
In terms of the information collected, Allison noted that again this will depend on a firm’s resources but said high persistency will generally indicate a good outcome, as will low complaints.