The end of April marked another milestone for the FCA’s Consumer Duty.

It was the deadline, under the rules, for manufacturers of existing products and services to publish their statements of target markets and price and value assessments.

It follows the regulator’s deadline, at the end of October last year, for firms to have their own implementation plans in place.

While advisers continue to focus on how their service meets the Consumer Duty, as distributors of products and services, there’s a secondary requirement for them to ensure manufacturers are complying with the rules. This shouldn’t be an onerous task, but as part of their service proposition for the end client, advisers need to be confident they’re placing their business with compliant organisations they can trust. They need to be reassured that the fund managers, platforms and discretionary managers further up the distribution chain are supporting them to deliver good outcomes for their clients.

The regulator asked manufacturers to publish their target market statements and value assessments by the end of April to give distributors the time to identify any issues causing potential harm to the end client, preventing good outcomes.

Advisers now have this window to take any necessary action before the next Consumer Duty milestone at the end of July when the rules will be in place across the industry.

Statements of target markets and the steps to take

Although advisers are expected to check that manufacturers’ statements of target markets have been published and that their clients’ needs are correctly aligned, the process should be straightforward.

Manufacturers’ target markets are likely to be quite broad as most products and services developed for the long-term savings market are designed to be flexible to meet clients’ ever-changing needs. Advisers should find the vast majority, if not all, of their client base is aligned to them.

As part of their own service assessment, advisers will have already segmented their clients into different target markets, and with this review, they should prioritise the client segments which could be at most risk of harm. The FCA emphasises that prioritisation is a key part of meeting the Consumer Duty rules so focusing on the clients most at risk of harm is the right first thing to do.

One specific area to carefully consider, and an area the regulator has called out, is high-risk products and the clients placed in them. Advisers should check which, if any, of their client base are in high-risk products, that those clients are suitably aligned, and consider making adjustments if they aren’t.

With broader client segments, one quick way to help identify any potential concerns is to check the statements’ ‘negative’ target markets, i.e. consumers less suited to that product or service.

Actions advisers should consider taking now

• Check manufacturers have published their statements of target markets to help to comply with the Consumer Duty rules by the July deadline. It’s manufacturers’ responsibility to publish these statements and firms aren’t at risk if they aren’t yet available, However, if they’re delayed, chase them up.
• Review the statements to check they’re broad enough to meet most clients’ needs.
• Consider reviewing the statements’ ‘negative’ target markets.
• If there are clients with more bespoke needs, check the products and services they’re in, especially if they’re in high-risk investments.
• If clients are not suitable for a manufacturer’s target market, consider how to move clients to a more suitable product or service.

Although there’s no need to document the review process in detail, advisers should confirm they’ve carried out the assessment, and the key findings and actions taken.

The important role of manufacturers’ value assessments

The majority of products and services that advisers place clients in are likely to pass the price and value assessment, so limiting any actions required. As part of the assessments, manufacturers must make it clear if they’re taking action to address any issues they’ve identified. These should be in the minority, however.

The price and value assessments should give advisers the reassurance they need to comply with the Consumer Duty. Although they’re not expected to duplicate the work, if manufacturers have highlighted an issue with a product or service, advisers need to identify it and potentially take action to address it. If manufacturers are already taking action, it may be all that’s required, and advisers may only want to monitor the situation. It’s worth adding that any action manufacturers do take will help advisers to prioritise actions they may want to take themselves.

Separately, under the Consumer Duty, the regulator expects advisers to consider the total charges a client is paying across the distribution chain as part of assessing the value for money of their own service. This includes the sum of the adviser charge and all other charges including fund management, platform and product fees, and discretionary management fees if appropriate.

One way to approach this could be to set a benchmark for total charges and check no client exceeds this. The cost of a product or service in isolation may be of value but once all costs are added together, the total may exceed the benchmark.

Actions advisers should consider taking now

• Check all product and service manufacturers have published their value assessments and if they’re delayed, chase them up. Note that offshore providers may not have to comply with the Consumer Duty rules but providers for retail customers in the UK do.
• Identify any product or service providers who confirm they do need to take an action following their value assessment. Carefully consider how these actions will meet clients’ needs and document what, if any, additional action to take.
• By the end of July, when the Consumer Duty is in place, price and value needs to be considered across the entire distribution chain. It’s advisers’ responsibility to determine that the total price the client is paying across every part of the proposition is fair value, so prioritise where the totals look excessive.

Doing the right thing for clients

The Consumer Duty is ultimately about doing the right thing.

For the FCA and for advisers, manufacturers’ statements of target markets and price and value assessments are two important sets of documents to, ultimately, ensure good outcomes for consumers.

And although the end of April marked another milestone for the Consumer Duty, the date that matters is the end of July when the rules will be in force and the industry across the distribution chain will need to be compliant to ensure good outcomes for all.

Find abrdn’s Statements of target markets here.

Find abrdn’s Price and value assessments here.

If your clients are invested in an abrdn platform, you can be confident we’re ensuring all product and service providers have delivered their statements of target markets and value assessments by deadline.

Take a look at our Consumer Duty Support Hub for more help to meet your obligations under the Consumer Duty rules.

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