Technology and compliance costs will need to rise, says CISI

As part of FTAdviser's Promote Your Profession campaign, we spoke with Christopher Morris, deputy head of financial planning at the Chartered Institute for Securities and Investment. 

FTAdviser: Is it going to be harder for new firms to demonstrate ongoing fair value under consumer duty?

Christopher Morris: Demonstrating and articulating value is not new and is something that most advice firms understand is important – while the planner / client relationship is often very strong this does not remove the need to demonstrate good value to clients.

This is an area that has the potential for conflict.--Christopher Morris, CISI

Under the consumer duty firms will need to evidence good outcomes and demonstrate fair value and clearly the challenge here will be to Identify what data will be needed in order to do this.

FTA: How are firms equipped to tackle the changes demanded of them in terms of technology and compliance?

CM: While smaller financial planning firms may not have the spending capability of larger advice firms, many smaller to medium sized firms are extremely efficient with sound processes and procedures in place.

The need for data will increase so I would expect all firms will be increasing the amount they spend on technology and compliance.

FTA: What sort of interventions in a clients' life should advisers use as an opportunity to prove value?

CM: Financial planning is not about the money, its about helping people to live their life on their own terms enabling them to meet their own goals and objectives. As such demonstrating value is something firms will do on an ongoing basis and will not be restricted to certain points of the clients life.  

FTA: Is there a danger that we conflate value and cost - how do we make the distinction?

CM: Many planners will tell you that when they meet a client for the first time the conversation is not about the money at all.

FTA: What sort of interventions in a clients' life should advisers use as an opportunity to prove value?

It is really about understanding the client in terms of what makes them tick, and what they want to do with their life and what’s important to them.

Over the longer term the consumer duty should result in firms paying less towards the levy.

This is the value financial planners deliver, so as long as the costs are sensible, and the client is getting good outcomes then the two are unlikely to get confused. 

FTA: Who owns the client anyway when there's an issue - for example, if a provider is not facilitating a transfer but the client is liaising with the adviser as agent?

CM: This is an area that has the potential for conflict, having said that firm client agreements will stipulate the scope of the relationship and ultimately both firm and provider are required to treat customers fairly which they will need to demonstrate and evidence at all times.

FTA: Is there a risk of more spurious complaints/CMCs pushing for redress under consumer duty?

CM: The overarching objective of the consumer duty is to improve client outcomes.  Happy clients are unlikely to complain so providing firms look after their clients I think this is an unlikely consequence of the regulation.

FTA: How often should a firm review whether they're giving fair value - and do they do this for every client, or every segment?

CM: This could be an enormous and never ending task if they don't standardise it. This would be a firm decision and would be for them to decide how often to review fair value.

FTA: Could consumer duty risk pushing up the cost of financial advice/preclude more lower earners from seeking advice?

CM: A reduction of complaints will over time reduce the amount of compensation paid by the FSCS which in turn will (in theory) lead to a reduction in the amount FCA regulated firms are required to pay towards the levy each year.

This will take time, but over the longer term the consumer duty should result in firms paying less towards the levy giving them the ability to help those who are not currently able to benefit from professional advice.