Almost a third (32%) of financial advisers expect their customer fees to increase as a result of the Financial Conduct Authority’s (FCA) Consumer Duty, according to research from Quilter.
More than half of advisers (55%) expected their fees to remain the same, while just 9% expected fees to decrease as a result of Consumer Duty.
Considerably more directly authorised (DA) financial planners (38%) were concerned about needing to increase their prices, compared with those who were part of a network (22%).
44% of financial advisers believed profitability would decline as a result of the Consumer Duty, while only 5% said that profitability would increase.
From 31st July 2023, the FCA’s Consumer Duty will come into force, which includes the price and value outcome which ultimately aims to ensure consumers receive ‘fair value’.
While the price paid is not solely indicative of value, it is an integral part and is something advisers will need to carefully consider to ensure they meet Consumer Duty requirements.
The duty prompted advice firms to review their fee models to ensure they represent fair value. Firms are expected to understand and clearly define their target markets to ensure fees are suitability structured for the services being offered.
Jenny Davidson, commercial proposition director at Quilter, said: “The implementation of the Consumer Duty has provided a useful reminder to advisers to evaluate their offerings and importantly price their services accordingly for different client segments.
“The fact that almost a third of advisers are saying that fees will likely increase may be a reflection of the costs associated with adapting to fulfil the requirements of the duty, particularly where those costs are borne without wider network support.”
She added: “Increasingly, advisers are favouring a more flexible approach to fees models to tailor for the needs of individual clients or client segments, and the facilitation of tiered adviser charging on platforms is playing a significant role in this.”
