Consumer duty has taught advisers to document how they help clients make informed financial decisions, according to Catriona McInally, investment specialist at M&G Wealth.
Speaking to FT Adviser, following the launch of M&G Wealth’s client segmentation guide for advisers yesterday (June 24), McInally discussed how this strategy can help the profession meet its consumer duty obligations.
She also looked at what the industry has learnt from the regulation nearly one year since its introduction.
She said: “We have learnt to write things down because of consumer duty. I have been pleasantly surprised at how well most adviser firms have taken on consumer duty and taken it on with a positive outlook.”
The regulation has allowed advisers to deliver better advice and has also allowed clients to actually see the value that advisers deliver to them, according to McInally.
“There is more to what advisers do than just invest money and funds. We've had, obviously, some volatile markets but if advisers have positioned what they do, then it’s not been a problem that the fund has fallen over the last year.
“Instead the client has been able to maintain or take more income out of their pension this year because of the cost-of-living crisis.
"Advisers give their clients the confidence or the comfort that they can actually maintain their standard of living and still afford the holiday they usually go on,” she added.
Client segmentation
The launch of the guide, in collaboration with NextWealth, was released with research which found over a quarter of advisers do not segment their client bank.
McInally believed the cohort of advisers who said they didn’t segment probably do but it is just not written down and documented.
She said: “When I speak to advisers who say 'I don't segment', they then say to me ‘well actually now that you've said what the FCA are looking for, I do do that, but it's in my head.’
"So that would be one of my key takeaways from this research, is that advisers need to have a process that's robust, repeatable and written down.”
McInally said it was “comforting” to see the majority of advisers had said they did do client segmentation.
But another reason why 26 per cent said they weren’t was because they were segmenting clients in terms of monetary amounts which she said doesn’t always take the individual client’s requirements into account.
“Say for example a YouTuber will become a millionaire by the time they're 30, they are not going to have the same requirements as someone who's accumulated a million pounds worth of pension at 60.
“So that's why this whole conversation about segmentation is important and this guide might just bring us back to the surface with advisers and get them to think about whether they need to revisit what they do and make sure it's fit for purpose,” she explained.
