With just over one month until the new Consumer Duty requirements come into force on 31 July 2023, Bankhall is urging advisers to ensure they are fully ready for the upcoming changes.
1. How can I evidence customers’ understanding of recommendations?
A good starting point is to have a standard list of questions to ask each client after they’ve engaged with their adviser.
For example: What were you recommended? Do you know what our costs are? Do you know what we are / aren’t able to offer you?
Every client’s needs will be different, but asking broad questions such as these will provide a means of drilling down into what someone took away from a conversation and provide peace of mind that everyone is on the same page.
It can also help identify trends with similar types of clients, which can be used to inform ongoing training and development needs.
As for the process of gathering this information, sending out an online survey or having another staff member make follow-up calls are both simple – but effective – ways to make this a normal part of working practice.
2. How can I determine if a customer is vulnerable?
Clients should be encouraged to view vulnerability as a spectrum of risk.
The FCA has identified four key drivers of vulnerability: health, life events, resilience and capability. ‘Health’ accounts for conditions or illnesses which might affect a customer’s ability to carry out day-to-day tasks, while ‘life events’ cover things like bereavement, job loss or a relationship breakdown.
‘Resilience’ considers factors which may impact someone’s ability to withstand emotional or financial shocks, while ‘capability’ focuses on those with limited knowledge of financial matters or low confidence in managing money, as well as other relevant areas such as literacy or digital skills.
Being vulnerable doesn’t mean that someone is unable to take advice, but rather that their adviser needs to make certain their service can be tailored to suit people’s specific characteristics.
It’s therefore essential to ensure all staff are trained to identify signals and signs of vulnerability and where to signpost people for additional support, as needed.
Ultimately, firms need to be able to evidence that they’ve asked the right questions to gain the necessary understanding.
3. How can I practically measure fair value?
A key element to measuring fair value is setting out information such as how a service or product has been priced, why it has been set at that price, exactly what benefits the service is delivering and what the cost of delivering it is.
Next is taking a bird’s-eye view of the end-to-end customer journey and questioning how easy and efficient this is for you and the client at each stage.
Don’t be afraid to engage with existing customers for feedback here as to what they perceive as providing value and what doesn’t.
Fair value is a complex area that many firms are struggling with, so to help with this service providers such as Bankhall have a range of support solutions available, including interactive calculators, to help measure and validate.
4. Am I at risk of causing foreseeable harm, if a client doesn’t want to have a protection conversation?
As any good adviser will know, there’s little point accumulating wealth if you don’t protect it. But a fact of life is that not every client will be open to talking about protection.
Where this is the case, the key thing is ensuring any conversations – and the output – have been reflected in a firm’s suitability report or other client documentation.
Ultimately, as long as an adviser can show they’ve looked to educate the client and give them information to reflect on, they’ve fulfilled their responsibility.
5. As a small advisory firm, where should I be focusing my attention?
Providing adequate evidence is going to be a key challenge for smaller advisory firms, as there won’t necessarily be dedicated people on hand to manage this.
Most one-to-two-person-firms are unlikely to be taking on swathes of new clients, so what’s most important is collating as much data as possible on the core service being provided.
Above all else, smaller firms must ensure they can demonstrate how their service has been designed to suit their existing customer base, and support with tangible evidence on how it adds value.
Consumer Duty is the most significant regulatory change our industry has seen in over a decade. It’s imperative adviser firms ensure they are 100% ready by focusing their attention in the right areas in the run up to implementation.
This might seem a daunting prospect as the clock ticks down, but there’s lots of support available and embracing the changes offers a great opportunity to ensure services and processes are delivering the best possible outcomes to customers.
Linda Preston-Todd is client relationship director at Bankhall
