Are you adjusting your fees

Like most changes in legislation affecting financial advisors, there’s a lot of chat in the run up to the implementation day, then it goes quiet, almost an anti-climax, change unfolds silently, then after a few months, the effects start to be noticed and advisors start to share how, if at all they are being affected.

I’ve mentioned in earlier emails, that consumer duty was not top of  the list of worries affecting IFAs I speak to , but  I was interested to read the recent  article in Citywire who were quoting research from Royal London in partnership with Lang Cat.

According to this research 37% of those who responded said they had changed their fee structure after completing the required fair value assessments.  21% of these found the changes difficult to implement.

This does reflect a tangible response to the new requirement for regulated firms to assess whether the prices clients pay are reasonable compared to the benefits they expect to receive.

Additionally, the research suggests that some firms have not effectively communicated the consumer duty to their clients, with a fifth admitting they haven’t informed clients about the new rules, and 39% neglecting to mention the fair value requirements.

This raises questions about transparency and client awareness within the industry. You can bet your house on the fact that our friends at the FCA also read these press articles, and they’re probably wondering that if the numbers are accurate, are the other 63% satisfied with their fee charging structure.

Will Consumer Duty lead to lower fees being charged to clients?

Possibly, the impact on fees may vary across different firms. Some may choose to lower fees to align with the fair value assessments required by the consumer duty, while others may find it challenging to make such adjustments or may not see the need to change their fee structures.

The overall effect on fees will likely depend on how individual firms interpret and implement the consumer duty, as well as the competitive dynamics within the financial advisory sector.

If the consumer duty encourages a more transparent and client-focused approach, it could potentially lead to increased competition and pressure on fees. However, the extent of this impact may vary, and other factors, such as the perceived value of services provided, could also play a role in fee decisions.

Personally, I think that the “Fair Value Assessments are the trickiest part of the “10 key questions for firms to consider”.

We are ready to provide assistance through our consultancy department in addressing any facets of the Consumer Duty. As we approach the end of the current year, should you be contemplating business modifications for 2024, we would welcome the opportunity to engage in a discussion with you.”