Consumer support – providing services in a way that meets clients’ needs – has been identified as the consumer duty outcome that advisers are finding most challenging six months on from the regulation taking effect.
In a survey of 300 UK financial advisers conducted this month, ‘consumer support’ ranked the highest of the four consumer duty outcomes, at 44 per cent.
It was ahead of ‘consumer understanding’ (39 per cent), which refers to providing information in the right way, and ‘products and services’ (37 per cent), designing advice services to meet clients’ needs, and ensuring appropriate targeting.
The research was carried out by Censuswide on behalf of Abrdn in January 2024 and polled 63 advisers at directly authorised businesses, 60 at restricted and 60 at networked firms.
Alastair Black, head of savings policy at Abrdn, said: “While we may have expected to see one area of consumer duty stand out more as being an area of focus, our research shows that, on the whole, adviser firms are as likely to be working on any of the four outcomes."
‘Price and value’ – ensuring clients receive fair value on the services provided to them – was the outcome where the fewest firms reported challenges demonstrating compliance (33 per cent).
However, it was the area with the largest variation in responses from different parts of the advice sector.
Directly authorised firms reported the most issues with price and value (46 per cent) – significantly more than the average and more than twice as many as firms with restricted authorisation (22 per cent).
Black said: “To me, this highlights the fact that every firm is dealing with a slightly different set of challenges. But it also indicates that there are many businesses that have developed a strategy for success.”
He added: “As consumer duty beds in, we may see the FCA pick out and share examples of best practice.
“Right now, there’s a clear opportunity for the industry – including advisers’ partners – to share learnings and successes themselves; to take hard-won solutions, and match them to ongoing issues. Everyone’s likely to benefit from something.”
Ensuring ongoing compliance
Abrdn’s research also showed the steps firms were prioritising to support their ongoing compliance.
It found advisers were most focused on improving how they gather client feedback (19 per cent), improving or introducing new systems to capture management information (18 per cent) and reviewing customer communications (18 per cent).
Just over one in six (17 per cent) was also starting to use, or increasing the use of, an outsourced managed portfolio service.
“A key takeaway from this research is that everyone is prioritising something to help maintain their compliance – the industry is, as expected, fully behind the FCA’s aim,” Black said.
“And it’s encouraging to see such a focus from firms on using their management information as a tool to self-assess areas of risk and foreseeable harm, and to measure progress.”
When asked further about what management information firms were gathering, respondents most commonly cited data from staff surveys (20 per cent), the outcomes of client reviews or the review of client files (19 per cent) and identifying clients paying above-average charges (including ad-hoc charges) (19 per cent).
Black added: “Taking a detailed compliance approach to consumer duty – for example, using data to measure against the four outcomes, is important.
“But to really align with the spirit of the regulation, and to do so efficiently, firms should also be testing themselves against the big picture; the goal of delivering better outcomes for clients. Keeping this front of mind will help minimise the risk that progress towards this goal is smothered by the process.”
sonia.rach@ft.com
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