I remember when TCF was launched, we messaged it as The Client First at the advice firm where I worked at the time. While Consumer Duty is much more than a rehashed TCF, it could be even more aptly summarised as The Client First. But if you examine our industry through that lens, which I am sure people from outside the industry do, we appear to be structured more The Product First.
Take the FCA’s own business standards: COBS, MCOB and ICOB, as well as the less-known FPCOB and PDCOB. Different standards that result in different authorisations, systems, contracts and advice processes and thus different advice. For many of life’s challenges, if consumers engage an adviser the nature of the advice would vary vastly by how that adviser is authorised. As the saying goes: ‘To a man with a hammer everything looks like a nail.’
Weathering the shocks
Whether my wealth and retirement plans are mainly investment and pensions or Buy To Let will largely depend on which type of adviser I engaged with and trusted many years ago. When I look at my retirement options, whether or not I consider let alone use equity release depends on the authorisation of my adviser and the capability and processes of the firm.
In his speech at the JPMorgan Pensions and Savings Symposium, Nikhil Rathi, chief executive of the FCA, seems to have fired the starting gun on putting this right. Rathi’s speech echoed points the chancellor made in her Spring Statement, which also placed the onus on the financial sector to help people weather financial shocks and achieve more secure futures. Almost an acknowledgement that government alone cannot help people weather the impact on an individual’s affordability from expansionism in the East and protectionism in the West. Global events have a direct impact on inflation, interest rates, jobs and most of all how people feel.
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As part of efforts to connect consumers with suitable financial products, Rathi highlighted the fragmented nature of the financial system, where pensions, savings, mortgages, and housing wealth are treated as separate entities, leading to confusion and missed opportunities for consumers.
While the speech focused on retirement and mortgages, we already have an MS24/1: Pure Protection Market Study and the statement that the regulator will ‘remove 100 pages of outdated regulations’. We could be seeing the merger of Business Standards many advisers have been calling for. In the ongoing advice service findings, the FCA acknowledges requests that they consider their rules for ongoing advice in light of market developments, but in return call the financial advice sector to support clients in their financial lives, with access to a range of different services according to their needs.
‘Advice revolution’
Both the regulator and the government view an ‘advice revolution’ as central to the task. As a result, they’re moving quickly on targeted support, with a consultation beginning shortly and a policy sprint already underway.
There needs be a clear delineation and step up from targeted support to advice, yet we know that there are barriers to that advice being truly holistic.
Holistic, derived from the Greek meaning ‘everything under the sun’, has often seemed like a self-indulgent luxury, and maybe it is when it come to a spa therapy. When it comes to advice, in a world where clients are finding themselves being affected by everything under the sun, they may need to rely upon all the available resources and solutions. Advice may not literally cover everything under the sun, but it may well need to cover ‘everything under Consumer Duty’.
See also: Nine in 10 advisers involve clients’ family in ‘great wealth transfer’ planning
Wherever this leads, there seems to be an increased drive to return to client focused financial planning that begins with the client and understanding their needs, objectives and preferences and going deeper into their purpose, values and even fears.
The regulation should never have been a barrier to putting the client first, regardless of your authorisation or expertise, but it may have inadvertently affected the financial product that was discussed and considered. Hopefully revised business standards will support matching the right solution to the person, over matching the person to the right product. In this uncertain world, the product may not be enough, and the best outcome and support will come from personal advice from an adviser unconstrained to give it.
Chris Jones is financial services director at Dynamic Planner
