The way advisers communicate with clients around retirement advice is expected to be the area most heavily impacted by the incoming Consumer Duty, according to new research from Aegon.
Ahead of the Consumer Duty coming into effect at the end of July, Aegon surveyed advisers on the extent to which they expect the new regulation to impact retirement advice. More than a third (34%) said the way they communicate with clients is the area expected to change the most, while 33% cited the way they assess the value of advice and 28% stated the way they segment their client base and service offerings.
The research found advised clients already place a high emphasis on communication, with 93% agreeing that fully understanding retirement advice is important. More than four fifths (81%) of advised clients say they have at least a general understanding of how on track they are with their financial objectives, suggesting that advisers are largely delivering what clients want and expect, said Aegon.
However, firms must do more to assess the value of advice, ensuring that their services offer good outcomes in terms of price and value, according to the retirement specialist. Currently, only a quarter (26%) quantify the value of advice to a great extent and 24% admit they give it little or no attention. Additionally, only 33% said it’s likely that they’ll make changes in this area.
While clients see the performance of assets as the most important component of retirement advice, advisers take a more varied approach, placing almost equal emphasis on four aspects – financial wellbeing (43%), tax savings (42%), portfolio performance (42%) and achievement of specific objectives (41%).
Separately, the research showed that just over half (51%) of advisers currently segment their client base and another 9% plan to start doing so in the next 12 months. Most advisers said they already, or will, segment on the basis of complexity of need (54%) which is in line with the Consumer Duty’s emphasis on putting the client’s needs first. Many advisers segment clients by the value of investible assets (53%), but Aegon warned that this may not always consider the intricacies of what clients may need.
Steven Cameron, pensions director at Aegon, said: “The FCA’s Consumer Duty will have a significant impact on the retirement advice market, not necessarily drastically changing the advice itself, but certainly the framework and evidence that surrounds it.
“Advisers should be considering all areas of potential change in their business and services that could help deliver good outcomes for their clients. Where confident they’re already delivering as the FCA would expect, it is good practice to document how they’ve come to that conclusion to avoid being viewed by the FCA as overconfident or complacent.”
Cameron added: “Ahead of the end of July deadline, it’s important that advisers examine where changes should be made not only to demonstrate to the regulator that expectations are being met, but to ensure that clients receive retirement advice that best suits them and the complexity of their needs.”
