Consumer Duty will change client communications
The Consumer Duty is likely to change how advisers communicate with clients, the way they assess the value of advice and the way they segment their client base and service offerings, according to adviser research.
Aegon and NextWealth researched the extent to which advisers expect the new rules to impact retirement advice.
The results revealed the most common way that advisers see the Consumer Duty changing their offering is how they communicate with clients.
Communicating with clients is a key focal point given that the Consumer Understanding outcome demands consumers receive communications they can understand.
The research found advised clients also placed a high importance on communication: 93% agreed that fully understanding retirement advice was important.
Encouragingly, four in five (81%) advised clients said they have at least a general understanding of how on track they are with their financial objectives, suggesting that advisers are largely delivering what clients want and expect, though with some room for improvement.
The findings also showed that clients and advisers see value differently: clients see the performance of assets as the most important component of retirement advice.
Advisers put almost equal emphasis on four aspects - financial wellbeing (43%), tax savings (42%), portfolio performance (42%) and achievement of specific objectives (41%).
The complexity of retirement advice makes it particularly vital that advisers can demonstrate a clear link between client, their needs and the services offered, Aegon said.
Steven Cameron, pensions director at Aegon, said: “The FCA’s Consumer Duty will have a significant impact on the retirement advice market, not necessarily drastically changing the advice itself, but certainly the framework and evidence that surrounds it.”
He said advisers should be considering all areas of potential change in their business and services that could help deliver good outcomes for their clients.
“Where confident they’re already delivering as the FCA would expect, it is good practice to document how they’ve come to that conclusion to avoid being viewed by the FCA as overconfident or complacent.”
He said the Consumer Duty seeks to put the client first and demands that consumers receive communications they can understand, services that meet their needs and which offer fair value.
These considerations are mirrored in the key areas advisers expect to make change in their retirement advice offering.
Mr Cameron said: “Ahead of the end of July deadline, it’s important that advisers examine where changes should be made not only to demonstrate to the regulator that expectations are being met, but to ensure that clients receive retirement advice that best suits them and the complexity of their needs.”
The FCA’s Consumer Duty comes into effect at the end of July.
The research was conducted in November and December 2022 with 221 financial advisers and 209 consumers of retirement advice.
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