Almost a third (32%) of advisers believe higher client fees will be necessary as a result of the FCA’s Consumer Duty, according to Quilter.
New research from the wealth manager found 55% expect their fees to remain the same, while just 9% expect fees to decrease as a result of the incoming regulation.
Directly authorised financial planners were found to be most concerned about the need to increase their prices due to the Consumer Duty (38%), compared to 22% of planners who are part of a network.
A decline in profitability may be a driver behind higher fees, with 44% expecting profitability to drop in the wake of the new rules, while only 5% believe their profitability will increase.
The Consumer Duty, set to come into force on 31 July 2023, is designed to ensure customers receive ‘fair value’, including the price and value outcome. While the fee is not solely indicative of value, it is an integral part and something advisers will need to carefully consider to ensure they meet their requirements. The Duty has prompted advice firms to review their fee models to ensure they represent fair value. While for some this process will be a simple task, others will likely recognise a need for increased flexibility to meet the needs of their different customer segments, Quilter said.
Jenny Davidson, commercial proposition director at Quilter, said: “The implementation of the Consumer Duty has provided a useful reminder to advisers to evaluate their offerings and importantly price their services accordingly for different client segments.
“The fact that almost a third of advisers are saying that fees will likely increase may be a reflection of the costs associated with adapting to fulfil the requirements of the Duty, particularly where those costs are borne without wider network support.
“Increasingly, advisers are favouring a more flexible approach to fees models to tailor for the needs of individual clients or client segments, and the facilitation of tiered adviser charging on platforms is playing a significant role in this.”
