Almost half (44%) of financial advisers expect their profitability to decrease, following the introduction of the Financial Conduct Authority’s (FCA’s) Consumer Duty regulation.

Research from Quilter, which was gathered by Boring Money, found that just 5% believed that their profitability would increase, with just under half (46%) stating that they expect it to remain the same.

Consumer Duty has caused many financial advice firms to review their business models, and as a result, is likely to have an impact on the resource available.

The research also found that a quarter (24%) of advisers expect their turnover to decrease, with just 8% stating that they expect an increase. Quilter has suggested that this perhaps indicates that advisers do not see a business opportunity in Consumer Duty.

Furthermore, almost a third (32%) of advisers are expecting their customer fees to increase as a result of the regulations.

When asked how much Consumer Duty could cost their business, the average answer was £18,161, with a median of £7,500. This figure differed for those who are in a network or are directly authorised, standing at £15,076 and £19,934 respectively.

Quilter’s research found that expected costs also vary greatly depending on the size of the firm.
Sole traders are expected to see a cost of £4,925 in line with compliance, compared to £93,325 for those firms with 21 advisers or more. This cost is expected to exceed £500,000 for two directly authorised financial advisers.

Advice recruitment director at Quilter, John Kerr, said: “The Consumer Duty is a landmark piece of regulation and has the potential to alter the customer experience for the better from day one. With the rules coming into force today, it is important that financial advisers have their systems and processes in place and that these have been communicated across the firm.

“Clearly there has been a cost implication for financial advisers and they have fears about what this will do to turnover and profitability. However, advisers should seek support externally too. Providers and suppliers have lots of resources out there for advisers to help them through this period of change, while looking to outsource elements of the value chain can ease the heavy lifting.

“The Consumer Duty needn’t be a drag on your business. Cleaning up and tailoring the customer experience more can be a great way to not only increase customer satisfaction, but also prompt positive reviews and referrals. While there may be some upfront cost now, this will hopefully come to fruition over the long-term.”

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