A third of financial advisers plan to change the way they communicate with clients because of the incoming consumer duty, a new survey has found. Similar proportions said they are also considering changing how they assess the value of advice and how they segment their client base and service offerings. 

  

The introduction of the consumer duty at the end of July will be used by many financial advisers as an opportunity to look at the design and nature of the services they offer, while others believe it is mainly a reinforcement of current best practice, provider Aegon has found in a new survey.  

 

The provider’s research shows the three areas advisers expect to change most are: 

  

Steven Cameron, pensions director at Aegon, said the Financial Conduct Authority’s consumer duty will change the framework and evidence that surrounds the retirement advice market. 

  

“Advisers should be considering all areas of potential change in their business and services that could help deliver good outcomes for their clients,” 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,” he added. 

 

 

He also stressed the need to keep a record of how conclusions are reached. Advisers will need to show evidence that they are working in line with the new rules.  

 

The consumer duty introduces a consumer principle around the overall standard of behaviour expected from regulated firms, as well as ‘cross-cutting rules’ and four consumer outcomes relating to: 

 

 

The research found advised clients already consider communications highly relevant, as 93% agree that fully understanding retirement advice is important. Four in five (81%) advised clients say 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. 

 

To deliver on the value outcome, firms will have to ensure their services offer good outcomes in terms of price and value. Aegon found that only a quarter (26%) of them currently quantify the value of advice to a great extent while a similar proportion (24%) say they give it little or no attention. Despite this, only a third of advisers (33%) said it was likely that they will make changes to price and value. 

 

Aegon concludes that clients and advisers see value differently. While clients see the performance of assets as the most important component of retirement advice, advisers put almost equal emphasis on four aspects, of which performance is just one – financial wellbeing (43%), tax savings (42%), portfolio performance (42%) and achievement of specific objectives (41%).  

  

The research was conducted in November and December with 221 financial advisers and 209 consumers of retirement advice.  

Will the consumer duty lead to big changes in financial advice or will it be largely business as usual?