Happy sunny but bloody freezing Friday all. Hope your week has been a fairly amiable one so far.
I, and the whole advice industry, have been thinking about advice costs and charges recently. Clearly the ongoing Consumer Duty consultation is driving a whole load of chatter around this (and I’ve linked an Apricity blog that gives an overview on the intention of this below, with much more detail to follow). From my meanderings out and about this week, there are some real extremes of how businesses are considering the Consumer Duty impact on them.
It reminds me a bit of the SM&CR run up, when some firms weren’t looking to increase their oversight and responsibility (as was the intention), but instead put mitigation strategies in place to protect them should they fail in their SM&CR duties (really, really not the point). With Consumer Duty, we’re seeing some firms use it as an opportunity to take a real, honest look at the value they’re adding. But others looking instead at how things can be shuffled around to technically hit the anticipated criteria, without actually making any real substantial change (cough < greenwashing vibes > cough).
The worrying time with regulation is when firms just really don’t understand the intended outcome, and instead focus on the black and white wording that is being used to get there (and we all know how subjective language can be). For example, our paraplanning team was recently given this feedback from an external network:
“The new guidance is, cost is everything… Apparently the FCA won’t take performance into consideration and treat cost as the main driver in suitability…” and it then goes into what additional cost is considered acceptable.
Let’s break this down:
- Cost is, and always has been, just one piece of the puzzle. Just as it is in every facet of life. A previous analogy I have used is the difference between a plain white t-shirt costing £10, and one costing £30. Personally, I would probably go for the latter. Not because either one is right or wrong – but because I expect I’d feel the value of the more expensive one, whereas someone else may well feel they’d wasted £20 and be quite happy with the lower cost one. It’s perceived value. Not just cheapness.
- That said, I don’t think a £300 plain white t-shirt is 30 times better than a £10 one.
- It’s not that the “FCA won’t take performance into consideration”. It’s just that additional charges being incurred for no reason other than saying it previously performed better is not, and never has been, reason to recommend a client transfers a plan. The new plan having access to different options / funds / flexibility etc that are more suitable for the client’s needs is the angle a firm should be looking at existing plans from.
- Focusing on just getting the lowest possible cost is not the right approach, and never has been.
- That said, cost is clearly a huge focus at present, both from the regulator and within the financial services industry more broadly, as people consider their own business models and, hopefully, the anticipated business models of some of the ‘disruptors’ that we all know are circling.
As is always the case, we should be focusing on the end outcomes and an efficient, competitive market that serves more clients at a better value and is still profitable, buoyant and enjoyable for those working in it, must surely be a positive outcome for all concerned? Unless your only consideration is profit…
Anyway, lots more to come on this and the consultation closes next week so be sure to get your thoughts in if you haven’t already. I’ve relinked last week’s teeny tiny quiz about starting a business… I’m finalising my plans on this next week, so a quick completion (or share with anyone you think might be interested) would be incredibly helpful. And I’ve also popped a link to next Wednesday’s (16th) investment webinar – ‘cos we all love the thought of a bitta CPD on a Friday afternoon.
Have a wonderful weekend all. A very lovely, very tiny friend bought me a bottle of champagne for my birthday, and it’s been almost a month and it is still in my fridge. Which feels wrong. And must be rectified.