Investing in your people is investing in your business. Your clients don’t buy widgets, they buy trust. That trust is deeper with good consumer outcomes.

Consumer Duty went live on 31 July.

Interestingly (and coincidently), the FCA also announced the thematic review into retirement income advice in June 2023, with a questionnaire targeting 1300 financial advisers. With 87 questions, it’s clear the FCA’s data request means business about retirement income advice.

What does (the consumer duty) mean for a Financial Planning firm – and its financial planners when giving best advice (about retirement income)?

There are five things to immediately consider for advisers on the front line:

• What is the plan? Can you and your client build a plan? A SMART plan? Is the plan sensible and sustainable, with clear objectives?
• Is your evidence and data-gathering sound?
• What risk appetite do they have? Risk attitude? Capacity for loss – what is their appetite for risk and can they afford to take the risk? Is your risk profiling robust?
• Critical analysis of the options – has there been any discussion about the options available? The pros/cons? Does the client understand what is going on? How can you measure this, how do you compare to other firms?
• What cashflow modelling are you using and can you explain it? Does the client understand it?

Critical evaluation of the costs and charges

The service proposition designed to keep the plan on track and keep it safe. Be clear on whom your service is right for and not right for.

Have you, the adviser obtained (and evidenced) informed consent for your advice, having gone through these five steps?

Does your firm’s advice process enable this and do your advisers deliver it? How do you compare to other firms? How do you enable this competence within your firm?

Qualifications are a great foundation and independently verified knowledge is critically important. However, it is the application of the rules and regulations into real life client scenarios that gets reviewed by the FCA.

Make the legislation changes personal. Bring the rules to life for the client. The recent announcements in the budget are a great example of needing to understand, discuss and inform individual clients of the implications to their personal circumstances.

The budget has huge implications for Financial planners and looking at implications and implementing these needs more than a PowerPoint or webinar presentation.

A great example is the misunderstanding from the budget that the Lifetime Allowance was abolished on 15 March 2023. It wasn’t.

It was the 25% LTA charge that was waived and the 55% replaced by marginal rate income tax.

How did your advisers communicate these changes to your clients?
Have you identified any clients that could be impacted?

You should be thinking ahead and preparing for more scrutiny, more questions and higher expectations from the FCA, heavily influenced by the incoming Consumer Duty and the results from the retirement income review due later part of 2023.

How we can help

Peter and John have extensive experience of helping firms and advisers with their retirement income advice proposition and adviser training. If you would like to discuss how we could help refresh and support your adviser training or provide input into your retirement income advice proposition, please do get in touch – we are always available for a virtual coffee.