Two-thirds of financial advisers fear the FCA’s new Consumer Duty will increase the advice gap.
But advisers remain confident they can meet Consumer Duty requirements, according to new research.
Advisers taking part in the Embark Investor Confidence Barometer warned that the Duty’s focus on value for money could widen the advice gap by encouraging advisers to reject marginal clients with smaller portfolios.
They said advisers may show a preference for clients with larger portfolios and more complex needs, where the benefits of their actions can be more easily evidenced under the Duty.
Meanwhile, three-fifths of advisers said they were worried about the impact of having to evidence that their advice was meeting the standards set by the Duty.
Last week the FCA’s director of consumer investments Therese Chambers told Financial Planners at the Festival of Financial Planning that the new Duty will be much tougher than the previous Treating Customers Fairly regulatory principles.
She said the FCA wanted the Consumer Duty to raise standards and push out bad actors and poorly run firms.
The Duty had its first implementation deadline at the end of October with the full rules applying from July for existing products and 2024 for legacy products.
On a positive note, most advisers surveyed for the Embark Barometer thought the new Duty will improve the overall experience of their clients. Almost three-quarters believed that their firm had the right plans in place to deal with the impact of Consumer Duty.
The majority of advisers also agreed that the Consumer Duty will change the way they think about overall cost to the consumer, suggesting that the FCA’s new regulations may have their desired effect.
Andrew Phipps, product marketing manager, Embark Group, said: “That the Consumer Duty will change the way many advisers think about the total cost to the consumer is a big positive on the face of it. However, the fact that advisers believe the focus on value for money could worsen the advice gap should be a serious concern for the FCA.”
Retirement and wealth management firm Embark was acquired by the Lloyds Banking Group in February for £390m.
• The Embark Investor Confidence Barometer is a twice-yearly survey of 1000 people by Censuswide for Embark Group. The latest survey was carried out in September. It covered 250 advised consumers (those that have a financial adviser) with a minimum of £100k investible assets, who have a pension and are aged 35-70, 506 non-advised consumers (those that do not have a financial adviser), with a minimum of £100k investible assets, who have a pension and are aged 35-70 and 252 (18+) financial advisers who have clients, whose company/firm has assets of less than £500 million.
