"Cleaning up and tailoring the customer experience more can be a great way to not only increase customer satisfaction, but also prompt positive reviews and referrals."
As the FCA’s Consumer Duty regulations come into force today, new research from Quilter has found that nearly half (44%) of financial advisers expect their profitability to decrease because of complying with the new rules.
In contrast, just 5% believe their profitability will increase, while just under half (46%) said that they expect it to stay the same.
The research also found that a quarter (24%) of financial advisers expect their turnover to decrease, with two-thirds (63%) saying it will stay the same. Just 8% expect turnover to increase, perhaps indicating that advisers do not see a business opportunity in the Consumer Duty.
When asked how much, if anything, they expect complying with Consumer Duty will cost their business, the average was £18,161, with a median of £7,500. For those in a network, this figure came out at £15,076, while those who are directly authorised expect costs of £19,934.
Expected costs vary greatly depending on the size of the firm too. Sole traders expect to see a cost of just £4,925 to comply, compared to a mammoth £93,325 for those with 21 advisers or more. For a mid-sized firm with between six and ten advisers, costs were expected to reach £20,208.
Remarkably, two directly authorised financial advisers stated that their costs to comply with Consumer Duty would exceed £500,000.
As a result, almost a third (32%) of financial advisers expect their customer fees to increase as a result of the regulations.
John Kerr, advice recruitment director at Quilter Financial Planning, said: “The Consumer Duty is a landmark piece of regulation and has the potential to alter the customer experience for the better from day one. With the rules coming into force today, it is important that financial advisers have their systems and processes in place and that these have been communicated across the firm.
“Clearly there has been a cost implication for financial advisers and they have fears about what this will do to turnover and profitability. However, advisers should seek support externally too. Providers and suppliers have lots of resources out there for advisers to help them through this period of change, while looking to outsource elements of the value chain can ease the heavy lifting.
“The Consumer Duty needn’t be a drag on your business. Cleaning up and tailoring the customer experience more can be a great way to not only increase customer satisfaction, but also prompt positive reviews and referrals. While there may be some upfront cost now, this will hopefully come to fruition over the long-term.”
