Practically, this will translate into time-consuming information gathering for advisers as product manufacturers and other parties in the distribution chain will inevitably seek to place reliance on an adviser’s more wide-ranging relationship with a customer.
Where an adviser becomes aware of changes in customer information previously communicated, there will be an expectation that advisers will communicate these changes to other parties in the chain. While information will also flow to the adviser, it is probable that much more will be expected to flow from the adviser.
Ultimately, it will be incumbent on firms in a distribution chain to allocate responsibilities proportionately.
Advisers and their firms are likely to have an elevated part to play in facilitating compliance with the products and services outcome where advice is provided as part of a package in a chain. The cost, process and burden for gathering and communicating this information is at this stage unquantified.
It will however be a pressing consideration in commercial contract negotiations between advisory firms, product providers and other intermediary firms.
Facilitating consumer understanding
Providing the right information at the right time to assist the average retail consumer in achieving their financial objectives is a central feature of the consumer understanding outcome.
The consumer understanding requirements apply to all firms involved in the production, approval and distribution of consumer communications.
Advisers, as distributors of communications, will have a duty to provide clear, understandable communications that allow the intended recipients to evaluate their options.
This will need to be done without the benefit of having prepared the communication, as common practice is for the product provider to give pre-prepared literature to the adviser.
This literature will have no scope for amendment or alteration.
The solution in these circumstances will be for the advisor to communicate any identified gaps in consumer understanding occurring as a result of a defect in the literature to the product provider for remedy.
Dealing with resultant complaints, claims of harm or detriment will need to be carefully addressed between parties in the chain.
Under the FCA’s proposals, firms are expected to tailor communications to the identified target market.
In addition, when a firm interacts with a consumer on a one-to-one basis – as will be the case in an advisory context – there is an onus on the adviser to tailor communications in line with the specific information needs of the particular client.
This will mean advisers will need to consider using different communication channels; layering the information so it is given in phases and other approaches to meet the consumer understanding outcome requirements.
Firms are required to test consumers' understanding of communications as part of this outcome under the duty.
