The FCA’s Consumer Duty has been heralded as one of the biggest new pieces of regulation in the advice market in decades. Ultimately, it aims to ensure that existing best practice around good client outcomes is applied consistently across the industry.

Our recent survey of over 400 UK-based financial advisers revealed that the market is generally aware of the proposed rules – which are due to be published in their final form at the end of July. Only a quarter didn’t have any knowledge of them at all.

But understanding what the FCA has set out is just a first – albeit crucial – step to implementation.

Our research revealed that some advisers expect that aligning with the regulation will have implications for their firms. And these implications may be causing concern among some firms as the legislative clock counts down.

Advisers anticipate change…

In our research, we asked advisers what their firms would need to do to implement the Consumer Duty as it’s currently drafted.

More than half of those we spoke to who were aware of the proposed regulations expected that their firm would need to make procedural changes to comply. Whereas just under half expected that their firm would need to hire new staff to comply. Just over two fifths expected to see their overhead costs increase.

On top of this, there were some interesting variations amongst respondents, depending on their firm type. For example, half of advisers working in directly authorised firms expected the need for further hiring, compared to just over two fifths in networked firms. Meanwhile, advisers working in networked firms were least likely to expect a financial impact – a sharp contrast to their directly authorised counterparts.

…however good practices are often already embedded

Overall, the data paints a picture suggesting many firms feel there’s a gap they’ll need to bridge to achieve the outcomes that the FCA will be looking for. That means that it’s unavoidable that there will be areas where some firms and advisers will need to make changes.

As I wrote in the first of my series of blogs looking at the implications of the regulations on the advice sector, the regulator is looking for a step-change in behaviour across the industry to make sure that firms are putting the needs of their clients at the heart of everything they do. And they’ll make sure that’s happening. But, in the majority of cases, any steps that a firm needs to take to comply shouldn’t be too onerous.

In the advice sector, good client outcomes are already wired into day-to-day operations. Many firms will already be delivering on what the new regulation aims to achieve by virtue of existing regulatory alignment and the very processes that are needed to give ‘good’, suitable client-specific advice.

Making use of the help at hand

Where adviser firms do need to make changes to comply, there’s plenty of support and insight available to make the process as easy as possible. It’s clear that many firms already plan to tap into that – and will be looking for help from a wide variety of sources.

Nearly half of advisers that we spoke to who were aware of the legislation said they’d turn to their platform partner for support with implementation. The rest said they’d either rely on internal resources or engage their external compliance provider.

Working with the right partners, with the right experience and expertise, will help advisers move at pace to overcome any barriers they face in their implementation journey – whether that’s understanding or interpreting the rules themselves, or finding effective, but efficient ways to make procedural changes, while minimising cost.

In the specific case of Consumer Duty, working with a range of different partners will have particular advantages. By its very nature, the regulation touches all parts of firms’ operations. Making the most of the expertise of those in firms’ supply chains, at each touchpoint, will only help ensure close alignment across the board.

Looking beyond Consumer Duty, firms that can continue to lean on these relationships will be in a strong position for any future changes to come.

When we asked advisers about their challenges in adopting new regulations in general, they most frequently pointed to a lack of understanding of the new requirements as their biggest hurdle, followed by the financial pressure of increased overhead costs. Others said they lacked capacity within their business to support the administrative burden of new regulations or struggled with implementation deadlines being too tight.

All are hurdles more easily cleared with the support of expert, insightful partners at a firm’s side.

Next steps

Regulation needs to evolve to make sure that advisers, and their clients, remain supported and protected.

Consumer Duty is a welcome piece of regulation for the sector because of the benefits that it will bring to clients and, as a result, adviser firms.

Implementation, and subsequent compliance, may need time, effort and change. But many firms may already find themselves more aligned with the regulation than they think. And, by making the most of the support of the right partners, this should help make implementation as smooth a process as it can be.

The value of investments can go down as well as up and your clients could get back less than they paid in

The views expressed in this blog should not be regarded as financial advice.