5 important gaps in the Consumer Duty where advice firms can improve their service
The Financial Conduct Authority’s (FCA) Consumer Duty is a new set of rules that financial advice firms must follow from October 2022 onwards. It aims to increase the quality of service advice clients receive from their advisers in various different ways.
In the Consumer Duty, the FCA stipulates that “consumers should receive communications they understand, products and services that meet their needs and offer fair value, and that they receive customer support they need, when they need it”.
In preparation for this, Elevation, the client feedback platform powered by VouchedFor, has analysed feedback from over 250,000 clients to discover the key areas where advisers can improve their services across the profession.
The Client Experience Report 2022 aims to provide a practical analysis of client feedback and reveals ways advisers can boost the client experience that are relevant to the new Consumer Duty rules.
The report uses feedback to identify the current pitfalls advisers are prone to and where and how they can improve things.
VouchedFor outline five crucial areas advisers can improve upon:
1. Firms are required to allow customers to understand the various costs associated with the solutions they offer
Data from Elevation’s research can back this up: it found that 1 in 6 clients (17%) don’t understand how they pay for financial advisory services. And, even following a first meeting, only 29% of prospective clients said they understood how an adviser’s fees work.
Be clear about your fees.
Ensure your clients know what products they are paying for as well as what services are included in their fees. Doing this at the outset of the client journey could improve client satisfaction.
Presenting your fees in a way that is easy for all prospective clients to understand will also help set you apart from your peers, not to mention engendering a level of trust with potential clients early.
Explain how you charge. For example, if you charge fixed rather than ongoing fees, explain why you do this, how it differentiates you and, most importantly, how your charging structure benefits clients.
2. Advisers must provide fair value and charge prices to clients that are reasonable compared to the benefits they receive
Surprisingly, according to Elevation’s figures, 2% of advisers’ clients were unsure about whether they were on the right course to reach the aims they had been working for with an adviser. Meanwhile, only 16% of advisers’ clients were confident they were on target to reach their goals.
Providing a breakdown of the price of your services could help clients determine whether they consider them fair value relative to the cost.
Consider the value in providing a digital solution that allows your clients to access and view their pensions and investments 24/7. The client-facing app from AdviceBridge provides a single figure showing what clients can afford to spend now and in retirement on a monthly basis.
Meanwhile, the goals-based tool lets clients see how altering their finances will affect them – both now and in the future.
3. Advice firms are required to take actions that support and enable their customers to follow their financial goals
When it comes to discussing the motivations behind their goals, only 13% of prospective clients said they have done this with their adviser. On top of this, one-third (34%) of clients say that they have had an in-depth discussion about their goals following their first meeting with an adviser.
This data could suggest that firms may not be doing enough to get to the bottom of their customers’ financial needs.
Discussing the motivations behind your clients’ goals from the beginning of their journey could give you a better point of view of their expectations but could also help to provide more accurate, tailored advice.
Technology could help you provide more value to clients during initial meetings, too. The AdviceBridge app can take care of much of the preliminary fact-find for you. This should allow you to enjoy a far more focused and positive meeting, rather than the mundane and time-consuming process of going through a fact-check that provides no value to the client.
4. Firms must provide customers with the information they require and at the appropriate time while presenting it in ways they can readily understand
Elevation’s customer feedback study revealed that 59% of customers reported that the correspondence they receive from them could be more understandable. Somehow, 0.5% of clients encounter no correspondence at all.
This element of VouchedFor’s research into client feedback could display a need for advice firms to pursue updated modes of communication with their customers. Whereas, for others, it means actually communicating with clients in the first place.
Elevation’s study reveals how firms’ communication with clients can be improved. Speaking in terms you can be confident they understand and presenting information clearly could help ensure that your services are also as inclusive as possible.
AdviceBridge helps gather information, analyse what is held and how it should be structured before producing a recommendation report for you to present to your client. With sophistication and detail, AdviceBridge shows the best way to invest across different tax wrappers, cutting fees, and saving tax.
5. The new rules mandate firms to test, track, and adapt their communications with clients to encourage understanding and positive results during the customer journey
Without gathering practical feedback from their clients, VouchedFor claimed that it’s difficult for advice firms to achieve this level of effective communication.
After Elevation’s survey of 570 financial advisers, it was discovered that less than a quarter (24%) of firms regularly asked their customers for feedback, while only 7% requested feedback from all prospective clients.
Constantly monitoring and updating your communications with clients could improve the services you provide. VouchedFor identified gathering feedback from clients as being a core way to improve your correspondence with them.
The AdviceBridge client-facing app allows users to update their financial information 24/7. The app will alert you to any updates or changes in their financial situation, enabling you to deliver timely, on-point advice with minimal effort, and adjust your communications accordingly.
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