Customer fees could increase as a result of the Consumer Duty, around a third of financial advisers believe.
Wealth management company Quilter found that 32% of advisers predict fees rising whereas 55% believe fees will remain the same off the back of the principles-based regulation.
Under half (44%) of advisers said profitability would decline due to the Consumer Duty and so Quilter believes this may lead to advisers feeling as they have no choice but to increase fees.
Only 5% said profitability would increase due to the Consumer Duty.
The Financial Conduct Authority’s Consumer Duty will come into force at the end of this month (31 July 2023). It aims to ensure consumers receive ‘fair value’.
Quilter said: “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 firm suggests tiered adviser charging models have been increasing in popularity as they allow advisers to set client fees in a flexible manner and tailor charges based on different customer segments.
These models “will play a key role in ensuring advisers can offer fair value to their clients” following the implementation of the Consumer Duty, Quilter said.
The research gathered by Boring Money on behalf of Quilter also found 38% of directly authorised financial planners are worried they will need to increase their prices due to the Consumer Duty compared to those planners who are part of a network (22%).
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.
“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.”
The research was carried out in June 2023 and surveyed 339 financial planners to obtain these results.
