The Financial Conduct Authority (FCA) introduced its Consumer Duty regulations today, and almost half of financial advisers anticipate a drop in profitability due to compliance with the new rules, according to Quilter.
Research by Quilter, conducted with Boring Money, revealed that in contrast, only 5 per cent expect their profitability to increase, while around 46 per cent anticipate it will stay the same.
The research also revealed that 24 per cent of financial advisers expect their turnover to decrease, while 63 per cent believe it will remain unchanged. Only 8 per cent foresee an increase in turnover, suggesting limited business opportunities from the Consumer Duty.
Advisers predicted that compliance expenses would cost, on average, £18,161, with a median of £7,500. Directly authorised advisers anticipated expenses of about £19,934, whereas those in a network anticipated charges of about £15,076.
Solo practitioners anticipated spending £4,925, whereas larger organisations with 21 or more advisers anticipated significant costs of £93,325. The estimated costs for mid-sized organisations with six to ten advisers were £20,208.
Quilter advice recruitment director John Kerr says: “The Consumer Duty is a landmark piece of regulation and has the potential to alter the customer experience for the better from day one. With the rules coming into force today, it is important that financial advisers have their systems and processes in place and that these have been communicated across the firm.
“Clearly there has been a cost implication for financial advisers and they have fears about what this will do to turnover and profitability. However, advisers should seek support externally too. Providers and suppliers have lots of resources out there for advisers to help them through this period of change, while looking to outsource elements of the value chain can ease the heavy lifting.
“The Consumer Duty needn’t be a drag on your business. Cleaning up and tailoring the customer experience more can be a great way to not only increase customer satisfaction, but also prompt positive reviews and referrals. While there may be some upfront cost now, this will hopefully come to fruition over the long-term.”
