Almost a third (32 per cent) of financial advisers expect their customer fees to increase as a result of the Financial Conduct Authority’s consumer duty.
According to research by Quilter, gathered by Boring Money, over half of advisers (55 per cent) expect their fees to remain the same, while just 9 per cent expect fees to decrease as a result of consumer duty.
The research, which surveyed 339 financial planners, found that more directly authorised financial planners (38 per cent) are concerned they will need to increase their prices due to the consumer duty compared to those planners who are part of a network (22 per cent).
It also showed advisers may feel they have no choice but to increase fees to maintain profitability as 44 per cent said they believed profitability would decline as a result of the consumer duty, while only 5 per cent said it would increase.
Jenny Davidson, commercial proposition director at Quilter, said: “The implementation of the consumer duty has provided a useful reminder to advisers to evaluate their offerings and importantly price their services accordingly for different client segments.
“The fact that almost a third of advisers are saying that fees will likely increase may be a reflection of the costs associated with adapting to fulfil the requirements of the duty, particularly where those costs are borne without wider network support.
“Increasingly, advisers are favouring a more flexible approach to fees models to tailor for the needs of individual clients or client segments, and the facilitation of tiered adviser charging on platforms is playing a significant role in this.”
The FCA’s consumer duty comes into force on July 31 and includes the price and value outcome which ultimately aims to ensure consumers receive ‘fair value’.
While the price paid is not solely indicative of value, it is an integral part and is something advisers will need to carefully consider to ensure they meet consumer duty requirements, Quilter said.
The duty has prompted advice firms to review their fee models to ensure they represent fair value.
As part of this firms are expected to understand and clearly define their target markets to ensure fees are suitability structured for the services being offered.
While for some this process will be a simple task, others will likely recognise a need for increased flexibility to meet the needs of their different customer segments.
Quilter said tiered adviser charging models are growing in popularity as they allow advisers to set client fees in a flexible manner and easily tailor their charges based on different customer segments.
In light of consumer duty, it said such models will play a key role in ensuring advisers can offer fair value to their clients.
sonia.rach@ft.com
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