In a world in which everything from medicine to trainers is personalised, the regulator is laying down a fundamental challenge to prove that services are in the best interest of the clients and represent value for money. If not, they could be deemed to be causing consumer harm.
Conversely, giving a client a cheap fund that they do not understand or which does not meet their preferences, or recommending the cheapest platform that the client cannot use later, does not help meet the duty either. So, what will good value look like in the age of consumer duty?
We can start by asking ourselves what the client really wants to know. First and foremost: am I going to be alright? Am I going to be able to fund the things that are important to me – whether that is accumulating enough to retire, managing risk in retirement, passing on money to my kids, or simply making sure I do not run out of cash?
The role of the adviser is to answer those questions. To enable clients to take control of their lives by helping them understand their options, the risks they face and those at their disposal.
To help them think through their preferences for their money – on sustainability, for example, which we know matters to the great majority of people. To help them navigate periods of volatility and to keep their eyes on their goals and help them stay the course.
Course of action
A direction, then, for the post-consumer duty world: make a plan, build solutions around that plan, make sure it aligns with the client’s real needs and proactively engage with clients to help them stay on plan.
Lean on technology to help the client keep track of how they are doing, giving them the reassurance they need that they are doing okay – or, if they are not okay, equipping you for the conversations that help them get back on track.
Make sure the client understands the value you are delivering through the choice of solution, the choice of manager and the ongoing proactive support you are providing. How to do this economically and profitably is of course rightly central to firms’ considerations.
One thing that can comes clearly through the consumer duty is the use of target markets. The regulator is keen for advice firms to lean on Prod to enable them to take client segmentation – which most firms already use to some extent – to the next level.