PY: The direct costs to businesses may include those relating to understanding the consumer duty and then performing a gap analysis on their policies and processes.
Using this information businesses will then need to make relevant adjustments through change projects and subsequently train staff on the new requirements.
There may also be IT costs for any system changes. And then there are the costs associated with monitoring and testing consumer outcomes.
The ongoing costs will be the need to test communications and then adjusting them to make them compliant.
There may be the need to hire more customer service staff and ensuring that they are monitored and servicing clients compliantly.
There may also be indirect costs for businesses resulting from increased legal uncertainty and loss of profits due to changes to products and prices.
FTA: How do you think the new rules will change your advice service? Any changes to ongoing advice?
PY: I think across the board financial advice businesses will need to get better at articulating the value that we provide to new and existing clients.
Similarly, for lower revenue clients, it may mean that advisers need to be clearer about what ongoing service really means in terms of style of delivery and frequency of in-depth interaction.
FTA: Would you say a comparison with the RDR in terms of the consumer duty's impact on advisers is fair?
PY: Yes, this piece of regulation is likely to be as impactful as the RDR.
It will change the way advisers need to work and think. RDR was about moving from an industry to a profession.
Consumer duty is about making sure the profession delivers sustainable value to clients, advisers, and business owners.
FTA: How will it change the adviser market?
PY: The main themes of the new regulation are pricing and fair value, across all advice sectors, not just investments like the RDR.
It is key that the profession as a whole gets better at defining value, articulating it, and demonstrating it.
Just like Covid accelerated the use of technology, regulation like this will keep that trend going.
It will also mean that advisers need to at the very least grasp the basics of the science of value and behavioural economics.
carmen.reichman@ft.com
