When I first read about the consumer duty, my initial response was: “This isn’t meant for me,” closely followed by: “This is treating customers fairly with teeth.”
We are a small community independent financial adviser, and we have longstanding close relationships with our investors.
We charge less than most advisers I know, and we have simple internal processes to ensure we do what we promise to.
This means we typically see outcomes first hand, we are confident of value for money and ongoing services are consistently offered and taken up.
I just was not fazed, and could not understand the big hoo-hah about how this was going to change the industry.
So I asked myself, one year on, has that changed?
Rather boringly, my answer is no; or not much.
I still think it is not meant for me, and I am not hearing ambulance-chasing adverts for my former clients on the radio.
I also still think much of the consumer duty was covered in treating customers fairly, which we have always embraced – TCF just lacked the framework to police against.
Nonetheless I have had some work to do, and here are some examples:
Data quality
We have had to improve the quality of our customer relationship management data, manually inputting a lot from document storage.
If you are to demonstrate good outcomes with management information, and identify groups of investors with issues to address, you will rely on the quality of your CRM data.
In particular this has meant updating risk profiles and vulnerable clients, where I previously relied on a PDF fact find or similar to look it up.
Performance
I now compile data of one and three-year performance against an Investment Association benchmark from annual review documents.
I write very little new business and many investors have had the same products for years for no specific purpose, so a good outcome for them is a long-term real return that is above average, over most time periods, after all charges.
Assessments
I have had to conduct my fair value assessments: apparently, I am a manufacturer as well as a distributor, although I think this classification of us is compliance overkill.
To consider asset allocation and fund selection as manufacturing is a bit rich when in an advised context.
We use lower-cost solutions anyway, so I do not have to justify additional expense on the back of an investment portfolio that has a c.15 per cent chance of returning more than a tracker fund with the same equity content.
Clients
I have had to segment my clients more formally and rely less on my discretion to justify services outside of our standard model.
As decumulating investors shrink their pot size, I may have to move them to a lesser service or a different fund selection, which I fear will be difficult to explain when it is 'because consumer duty says I need to show good management information in my fair-value assessment'.
