2023, Consumer Duty and how advisers should embrace change

One of the criticisms often levelled at the later life lending advice community is that it is a ‘cottage industry’, made up of ‘too many’ smaller businesses or one-man/woman bands and that this is somehow seen as some sort of failure in terms of reaching a wider audience for its products and solutions.

The reality of course is that this ‘cottage’ element is one of the driving forces of the sector – the fact we have large numbers of smaller firms operating and who are fully immersed in the delivery of specialist, quality advice to later life clients is, in my view, a massive positive.

Now we do have bigger corporate adviser firms as well and they have been instrumental in terms of getting the later life lending message out, but I also know that some older customers put a premium on dealing with, what I call, coalface advisers, and from my perspective it is this element of the adviser community which will continue to lead the way in terms of meeting the needs of a greater number of clients.

This great strength of the later life market however does not simply exist in a vacuum, particularly when it comes to regulation, the protection it requires firms to afford its customers, and all other elements of delivering quality advice.

Smaller firms cannot hope that the big regulatory edicts that come down from the FCA simply don’t apply to them, or that they can muddle through until the proverbial you know what hits the fan, and provide a remedy thereafter.

In that regard, we conducted some recent research around the Consumer Duty – due to kick in next July I might add – and firms’ preparedness. While the vast majority of firms we surveyed felt ready, nearly a fifth (17%) felt the opposite and 8% couldn’t decide whether they were prepared or not.

Perhaps even more worrying, especially given the limited timetable left for firms to be ready, was 5% didn’t know what changes were being made as part of the Consumer Duty and only 19% of advisers said they felt very prepared for those changes.

Now, of course, there is some time left and I fully anticipate there will be plenty of reviews taking place in the early part of 2023 on operations and process, the consumer journey, the value advisers offer, what they charge for it, and detailing what the consumer actually gets for their money, but I also hope firms are not merely sitting on their hands and hoping this is something that either doesn’t impact them or that it will somehow go away.

It will not. On a recent Breakfast with Stuart meeting I pointed out that Consumer Duty impacts every single one of those who were listening in – whether adviser, distributor or provider – and the best thing would be to look at it as the opportunity it is, rather than a series of obstacles to be overcome.

After all, what better introduction to a client could there be, than you setting out all the positive outcomes you can achieve for them, how you intend to go about this, how you will be the one to hold their hand through this process, how your advice comes with all the required protections, and how you will go about delivering the value they want from an engaged adviser.

There are so many aspects of our life as a consumer where we get nothing like what I’ve described above. When we go and buy a phone, who do we have access to? Potentially a less than engaged employee or a call centre employee half-way round the world?

With later life lending, the customer has direct access to you at all times and there is a huge under-appreciated and under-promoted value to this. Advisers are professionals, highly skilled at the top of their game, and Consumer Duty will allow you to highlight exactly what you offer and what you deliver right from the outset.

What we can’t ignore is what it will require of firms. Again, this is a new world and individuals/firms will not be able to do the same thing in 2023 as they did in 2022, and that is in my view, a good thing.

So, in preparation, access all the webinars and support resources available to you and your firm. Start that full MOT on business processes and systems, work through where your customers are coming from and the advice journey you will take them on; make sure your record-keeping is of the highest quality and ensure the technology you use speeds things up and is as efficient as possible, otherwise what’s the point?

In essence, use this time between now and July wisely and work with businesses like ourselves and providers, to secure all the data and information you need to be Consumer Duty ready. This is a big change for our marketplace however, get it right, and it will allow you to deliver big business and consumer dividends for a very long time to come.