Financial advisers have revealed the most challenging areas of the Consumer Duty – six months after the rules were implemented.
According to research from Abrdn, 44% of respondents found consumer support to be most difficult aspect since the Duty came into effect on 31 July 2023.
Overall, 39% said consumer understanding was the biggest challenge.
Consumer understanding is defined as “providing information in the right way, at the right time in a clear way, and demonstrating that clients are understanding products and services”.
Just behind was ‘products and services’, which is where advice services are designed to meet clients’ needs and ensuring appropriate targeting (37%).
Finally, 33% said price and value – ensuring clients receive fair value on the services provided to them – was the most challenging by-product of the Duty.
Price and value were also the areas with the largest variation in responses from different parts of the advice sector.
Directly authorised firms reported the most issues with price and value at 46%, whereas only 22% of firms with restricted authorisation faced problems.
In regards to the areas that advice firms are focusing on surrounding the ongoing compliance of the Duty, improving how they gather client feedback came top at 19%.
In total, 18% of firms said they were improving or introducing new systems to capture management information and reviewing customer communications.
Finally, 17% said they were starting to use, or increase the use of, an outsourced managed portfolio service (MPS).
In September 2023, Legal and General Investment Management (LGIM) said the Duty has resulted in the business having a lot more conversations with advisers who had never used a MPS prior to the regulation.
LGIM entered the MPS market in September 2021, in response to client demand.
Also firms were mostly gathering information on data from staff surveys (20%), the outcomes of client reviews or the review of client files (19%) and identifying clients paying above-average charges (including ad-hoc charges) (19%).
Abrdn head of savings policy Alastair Black said: “While we may have expected to see one area of Consumer Duty stand out more as being an area of focus, our research shows that, on the whole, adviser firms are as likely to be working on any of the four outcomes.
“To me, this highlights the fact that every firm is dealing with a slightly different set of challenges. But it also indicates that there are many businesses that have developed a strategy for success.
“As Consumer Duty beds in, we may see the FCA pick out and share examples of best practice.
“Right now, there’s a clear opportunity for the industry – including advisers’ partners – to share learnings and successes themselves; to take hard-won solutions and match them to ongoing issues. Everyone’s likely to benefit from something.
“A key takeaway from this research is that everyone is prioritising something to help maintain their compliance – the industry is, as expected, fully behind the FCA’s aim.”
To obtain these results on behalf of Abrdn, Censuswide spoke to 300 UK financial advisers.
This included 63 working at directly authorised businesses, 60 at restricted businesses and 60 at networked firms.
