Consumer Duty increases regulatory risk for advisers

A recent special report from AKG, ‘The future of the advice market – state of flux’ highlights the cost burden of increased regulation and the ongoing challenging economics of advice.

| 3 min read

The new Consumer Duty came into effect on 31 July 2023, with the aim of setting higher and clearer standards of consumer protection across financial services. This includes more stringent rules and processes, increasing regulatory risk for advice firms.

According to AKG’s latest research, 37% of financial advisers listed regulator or legislative change at their biggest concern about the ongoing operation of the advice market.

How will new Consumer Duty impact advice firms?

The FCA’s Consumer Duty rules will impact all advice firms, but particularly those who managed their investment operations in house. Under the new regulations, it’s no longer enough to say you research the market for the best opportunities across the entire investing universe. Firms must identify why they didn’t select or recommend certain investments, and why they didn’t research certain areas of the market.

In other words, firms need to be able to qualify all their investment decisions. They are also required to deliver on price and value. This ensures firms are providing fair value for money for the products and services offered, increasing downward pressure on already squeezed margins.

The benefit of outsourcing the investment management to a third party could deliver better outcome for clients, but also reduce regulatory risk for advice firms.

Reasons for outsourcing investment management services

Outsourcing icon with finger hovering over

Outsourcing the day-to-day management of investors’ portfolios to a specialist discretionary fund manager carries many benefits:

  • Expert research teams – by outsourcing, you leverage specialist investment expertise and asset allocation models, using a whole-of-market approach to stock selection and market-leading research capability, considering all markets, asset and fund types, with no reliance on in-house funds.
  • Tailored-made portfolios – delivering portfolios that are aligned with clients’ risk appetite and real-return objectives, while also accommodating certain client-specific requirements. For example, client's drawdown and income needs.
  • Reduced regulatory risk – advisers can take advantage of investment expertise, track record and insights – so you'll have more time to focus on managing your client's wealth plan and nurturing your relationship with them and their family.
  • Increase portfolio potential – a dedicated portfolio management team to build and manage total return portfolios that offer a centralised view of asset allocation and stock selection.
  • Peace of mind – you and your clients can enjoy the peace of mind that comes with knowing their investments are being continuously monitored and adjusted by experienced investment professionals.

Partnering with Charles Stanley to delivery better client outcomes

Financial advisers work in partnership with our investment managers to manage their client's investments for them for all sorts of reasons. We’re here to help your clients create a more secure financial future for themselves and their families.

Built to deliver consistent outcomes, our discretionary management services provide clients with portfolios constructed in line with central views on asset allocation and stock selection, whilst also accommodating certain client-specific preferences.

Download the report

AKG is a leading provider of information to the financial services community. The report is proudly sponsored by Charles Stanley.

Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.

How will advice evolve over the coming years?

Download AKG's latest report and learn where where the market currently stands and how it might evolve over the next few years.

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