CONSUMER DUTY CORNER

Financial Advisers and Measuring Consumer Value

How can Financial Advisers measure and demonstrate value for Consumer Duty?

Firms need to consider value in the context of charges and the benefits delivered.

Boring Money’s recent reportA Framework for Measuring Value for Advice Firms –outlines five key pillars of value for financial advice[i] and use them to track value on an ongoing basis:

• Fair value (FV) is about more than price and performance (FCA focus)

• Performance is easy to calculate and quantify in relation to charges and value but may not be the most important factor in determining value for advised clients

• Multiple factors to measure value – practical technical and emotional considerations

• The value of each component factor will be nuanced and dependent on the client and the service consumed

• Advised clients blend practical factors, such as financial performance and the expertise of the advisor, with emotional factors, such as trust and peace of mind

1. Trust

2. Financial Planning

3. Information and recommendations

4. Performance

5. Fees

Components of the value of advice - such as trust and peace of mind - can be difficult to report and evidence for firms:

1. Given the focus of CD on segmentation – firms can frame their treatment of/engagement with segments based on what clients’ value most (e.g. trust, financial planning and peace of mind)

2. Consider what the client wants and how you deliver that:

• Identify your target market, understand their needs, characteristics and objectives

• Test and refine your client communications with your target market - ensure that consumers are able to find information, understand it and use it to make good decisions

Smaller firms

Proportionality should be applied – smaller firms should not be concerned about granularity of data – they should focus their efforts on ensuring they can demonstrate they are delivering value (this is a key area for the FCA – as noted in their FV framework review). Show your thought process, e.g.:

1. What is it my client values?

• Consider proportionality, benefits delivered, and if the fees are fair for the value received by the client

• Measure the value you provide to clients and benchmark this against competitors - to provide independent metrics and input into your value frameworks

Firm focus on reporting, metrics and MI

Data is key - FS firms currently have access to backwards looking indicators. For CD, firms need to consider identifying lead indicators – understand the pinch points and points of friction and act to address these –this is an important aspect of FCA expectations as a data led regulator.

• ‘Alex Roberts, PIMFA’s Head of Regulatory Policy and Compliance, spoke at the NICE-Actimize Conference on the 16th May on the

2. Firms should consider what drives value for their client – various practical technical and emotional considerations, e.g.

• proactive advice or depth and quality of information

• provides reassurance and peace of mind challenges and impact of consumer duty.’

• ‘Listen to Alexandra Roberts, Matthew Connell (Director of Policy and Public Affairs, Chartered Insurance Institute, and Andrew Green (Head Of Compliance Helpdesk, Threesixty Services) discuss challenges of the Consumer Duty on the FT Adviser podcast’

PIMFA Consumer Duty Working Group – 13 June (11am)

Our next Consumer Duty Working Group will take place on the 13 June at 11am. Our associates, Beyond, will be hosting this session on deliverability. If you would like to join this session, please get in touch with YasminA@pimfa.co.uk or AlexandraR@pimfa.co.uk

FCA introduces new rules for marketing cryptoassets

The FCA have issued PS23/6: Financial promotion rules for cryptoassets - summarising the feedback received on its earlier consultation on cryptoassets, setting out the final policy position and near final Handbook rules.

The financial promotions regime will apply to all firms marketing cryptoassets to UK consumers regardless of whether the firm is based overseas or what technology is used to make the promotion.

The definition of a financial promotion is broad and applies to a wide range of communications made by a firm including its website, mobile apps, social media posts and online advertising.

The FCA:

• Will proceed with categorising cryptoassets as ‘Restricted Mass Market Investments’ and applying the associated restrictions on how they can be marketed to UK consumers

• Make targeted changes to its consultation proposals to align with the rules set out in PS22/10 for other high-risk investments. PS23/6

Table 1 (pages 9 and 10) summarises the changes and includes changes made as part of PS22/10.

• Has published near final rules (Appendix 1 PS23/6) that will have effect from 8 October 2023 - there will be 4 routes to lawfully communicate cryptoasset promotions to UK consumers

• Will take robust action against firms for breaching the rules once they are in effect

• Have published a consultation - GC23/1 Cryptoasset financial promotions: Guidance for firms on non-Handbook guidance, so firms clearly understand its expectations around the requirement that financial promotions are fair, clear and not misleading. The deadline for responses is 10 August 2023

The FCA have also published a Research Note: Cryptoassets consumer research 2023 (Wave 4)

PIMFA is proud to be partnering with the Morningstar Investment Conference London this year

To join us on 4 July register here

The discounted early-bird price to attend is £19, thereafter £99. Register now to secure your place and save £80 if you register before 31st May 2023!

Press Releases

PIMFA calls on Government to embrace a generational opport...

PIMFA warns of ‘halo effect’ from FCA marketing rules for crypto

PIMFA calls for ‘surgical approach’ to any changes to the SM&CR...

Wealth managers and advisers want more support in...

PIMFA welcomes reduction in FSCS levy but a longer term

Press Coverage

Forbes Advisor: Investment & Crypto News: Watchdog Bites...

Your Money: Regulator to bring in ‘cooling-off period’ as part of

Citywire New Model Adviser: Regulator launches crypto...

The Wealth Net: PIMFA calls on government to approach SM&CR...

Financial Planning Today: FCA to impose 24 hour 'cooling off'...

EVENTS & LEARNING

PIMFA Compliance Conference

Attend in-person or virtually

21 September | 09:00 - 17:00

Hear from leading industry experts on the key issues facing compliance professionals in the investment management and financial advice world.

Bringing together a high-level audience who can engage with the experts, this conference will facilitate fruitful discussions with opportunity for questions and networking.

Please note that responses to this email address are not monitored. If you wish to get in contact, please email info@pimfa.co.uk