One-in-six (16%) of financial advisers expect the Financial Conduct Authority’s (FCA) Consumer Duty value for money rules to lead to an increase in the total charges paid by clients, Copia Capital Management research has revealed.
The poll of 116 advisers was conducted during a webinar on the value-for-money-assessment requirement of consumer duty rules, by Copia’s managing director Robert Vaudry and the Lang Cat’s consulting director Mike Barrett.
Almost two-fifths (38%) of advisers believe the consumer will have no impact, while more than a fifth (22%) expect to see a reduction in some or all fees.
The poll findings show a change in adviser sentiment since the Lang Cat asked the same question in its research last October.
At that time, almost two-thirds (64%) thought the rules would have no impact, 18% believed they would lead to a reduction in some or all fees and just 2% expected an increase in overall charges.
Vaudry said: “In recent meetings with advisers, several firms currently charging clients less than 1% said they are now considering putting their fees up − either increasing the absolute fee or raising the asset thresholds where fees decrease.
“This may have been something they were thinking about anyway to reflect the rising cost of living, but we’re also hearing that through the requirements of Consumer Duty, firms have a better understanding of the cost of the services they provide and the value they are delivering for clients, giving them an opportunity to re-evaluate their charges. As a result, I think we could see the cost of advice increase marginally.”
Value for money
Reflecting on individual client needs, Barrett said: “Almost certainly, someone with £3m ($3.74m, €3.39m) to invest will have more complexity from a planning and investment management point of view than someone with £30,000.
“However, just charging a blanket percentage without considering the client need, especially if you have very high-net-worth clients, will be poor practice. There is likely to come a point where the Consumer Duty assessment process will shine a light on the cost of delivering these services.
“You might need to cap your fees for high net worth clients, while at the other end of the scale, you could find that those with lower assets just aren’t going to get good value for money from the fees you need to charge.”