With the 31 July deadline just a matter of days away, Consumer Duty is, not surprisingly, the most talked about subject among financial advisers right now.
There are all sorts of opinions flying around but are the Financial Conduct Authority’s four outcomes – products and services, price and value, consumer understanding and consumer support – really that difficult to achieve?
All firms with their clients’ interests genuinely at the centre of their service should be aiming to deliver these outcomes and more already. It’s just good business practice.
In my experience, the best way to find out how you are doing is to ask your clients.
Many years ago, when I provided a mortgage service, I thought my clients valued me because I was independent and could use any lender or life office. I was proud of that.
Questions like these are pretty basic. Shouldn’t we be exceeding such relatively low expectations?
Then a client told me what they really valued was that I would see them after work and at their home. After asking others, I found they also valued the convenience of my service, not what I thought was valuable.
Today, we regularly ask clients how they rate our service and the responses can be surprising.
When it comes to Consumer Duty, advisers should be asking clients to rate them based on their understanding of the services they receive using questions around the four outcomes, such as:
- Their understanding of the products they have purchased and how they match their needs.
- Whether they consider the adviser to have provided good value for money.
- Whether they understand the advice provided.
- Whether the adviser provided good support throughout the process.
Analysing clients’ responses will help firms continually improve their service and meet the new FCA requirements.
However, questions like these are pretty basic. Shouldn’t we be exceeding such relatively low expectations?
We ask prospective clients to score themselves on 10 key questions before the first meeting and on a regular basis thereafter
The questions that really need to be asked (and that clients may not even know they need the answers to) are:
- How much is enough to give them the lifestyle they desire, without running out of money?
- Their understanding of the investment return (and therefore level of risk – they may be taking too much) they need to achieve enough.
- How much they will leave, how much they need to leave, how much they want to leave and understanding the consequences if these values are different.
- How to stop worrying about money.
All these questions are very important and valuable. But let’s focus on the last one.
I find that, regardless of their wealth, most people worry about money. If an adviser could identify and measure how much a client worries about money and then help to reduce or even eliminate those worries, how is the client going to feel about their adviser? I think we can be pretty confident they will see high value in the service.
Happier clients equals loyal clients, which equals increased equity value for our businesses
The big challenge is to be able to easily evidence, monitor and measure the outcomes.
We ask prospective clients to score themselves on 10 key questions before the first meeting – and on a regular basis thereafter. Improving scores will help evidence the value of our service.
Conversely, a dip in a future score may indicate a change in a client’s circumstances or understanding, flagging that we need to react to get the client back on track, as per the consumer understanding and support outcomes.
Good advisers should be able to easily exceed the Consumer Duty outcomes. They just need to ask their clients how they feel about what they do for them, record their responses to provide evidence for the regulator and monitor their performance to continually strive to improve what they do.
Happier clients equals loyal clients, which equals increased equity value for our businesses. Happy days.
David Lamb is director of Lamb Financial
