As the FCA’s Consumer Duty regulations come into force today, a significant portion of the UK’s financial advisers are bracing themselves for an impact on their profits. New research from Quilter reveals that nearly half (44%) of advisers expect a decrease in profitability due to compliance with the new rules, while only 5% believe profitability will increase.
The study, conducted by Boring Money, also found that advisers on average expect compliance with Consumer Duty will cost their business £18,161. Those in a network forecast costs of £15,076, whereas those who are directly authorised predict costs of £19,934. Expected costs range from a mere £4,925 for sole traders to a significant £93,325 for firms with 21 or more advisers.
Remarkably, two directly authorised financial advisers stated that their costs to comply with Consumer Duty would exceed £500,000.
John Kerr, advice recruitment director at Quilter Financial Planning, commented on the findings, saying: “The Consumer Duty is a landmark piece of regulation and has the potential to alter the customer experience for the better from day one. Clearly there has been a cost implication for financial advisers and they have fears about what this will do to turnover and profitability.”
Additionally, the research highlighted that almost a third (32%) of financial advisers expect their customer fees to increase as a result of the regulations, and a quarter (24%) of advisers expect their turnover to decrease, while two-thirds (63%) predict it will stay the same.
Kerr added encouragement for advisers, stating: “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.”
