More than half (57%) of advisers say they have made changes to the way they approach protection because of Consumer Duty, a new study has found.
The research, by protection challenger Guardian, revealed that the Consumer Duty is impacting advisers and the way they operate their businesses.
More than 40% of adviser respondents to Guardian’s survey said they expect to make more protection recommendations because of the regulation.
A further 58% expect to make the same number of protection recommendations, with only a small minority (1%) who said they expect to make fewer.
The survey also found that the majority of advisers believed that the regulation would result in a move towards value-led protection recommendations.
About 84% agreed that with Consumer Duty’s emphasis on fair value, the portals and associated product analysis services will become a more important part of the selection process.
While 83% expect Consumer Duty to improve consumer experience of protection.
And 81% of advisers said that Consumer Duty will result in more advisers focusing on quality over price when selling protection.
The research asked advisers about how Consumer Duty was impacting their own businesses, and what changes if any they were making to comply.
Sixty-two percent of advisers said it was having at least a degree of impact, with 49% stating it was having ‘some’ or ‘reasonable’ impact, with another 13% stating the impact was ‘big’ or ‘very big’.
When asked to rank which of the outcomes or cross cutting rules was having the biggest impact in terms of the changes being made to their firm, the 442 advisers who answered this question ranked ‘consumer understanding’ as number one.
This was followed by ‘price and value’ in second place, and ‘products and services’ in third.
‘Consumer support’ came next, followed by ‘firms should act in good faith’, then ‘firms should avoid foreseeable harm’.
And bottom of the list, in terms of the changes being made, was ‘firms should help consumers achieve their financial objectives’.
This most likely reflects that this is already well incorporated into their business and processes, according to Guardian.
The survey also asked advisers to rank the area/function within their business that Consumer Duty was causing the bulk of the changes being made.
Of the 429 respondents, advisers ranked ‘advice processes’ at number one, followed by ‘client communications’.
‘Documenting evidence’ came third, followed by ‘partnerships’, including making protection referrals.
Lower down the list, advisers ranked ‘due diligence of their recommendation’, ‘fees charged’ and ‘IT processes’ respectively in terms of the areas/functions where changes were being made because of Consumer Duty.
About 35% of advisers said they’d made significant changes to their website. Advisers were also asked whether across the market, providers’ communication to date was clear and useful enough to equip them to comply with the Duty, with 89% of them answering yes.
The Financial Conduct Authority’s Consumer Duty, which comes into force on 31 July 2023, aims to set higher standards of consumer protection across all retail financial services.
Jacqui Gillies, Guardian marketing and proposition director, said: “It’s great to have so many advisers give us their view on Consumer Duty and even better to hear that the regulation is having a positive impact – not just on the customer but on the protection industry as a whole.
“The fact that over 40% of advisers said they expect it to lead to them making more recommendations will mean more customers getting the protection they need.
“It’s also encouraging to know that advisers are taking the Duty seriously and making changes to their businesses where they feel they have potential to further improve outcomes for consumers.
“Knowing that 83% of advisers expect the Duty to improve the consumer experience of protection is, I think, a massive boost for our industry in the current climate.”
Commenting on the findings, Roy Mcloughlin, Cavendish Ware director of strategic partners, said: “Whenever new regulation comes along, the workload and costs associated with the changes are often well documented.
“So, it’s really good to see Guardian’s research findings show that when it comes to Consumer Duty, the majority of advice firms agree that it will lead to an improved consumer experience of protection, and also for many, an expectation that they will make more protection recommendations.”
Ian McKenna, Protection Guru founder, added: “While the increased profile Consumer Duty will give protection advice is an enormous opportunity, advisers need to understand the significantly increased responsibility they will have in justifying advice.
“For decades it has been possible to create price comparison tables in just a couple of minutes, but now they have the challenge to assess and justify value. This requires far more detailed analysis of policy terms and conditions.” –
The Guardian adviser survey interviewed 796 advisers between 11 June and 7 July 2023.
