“In my opinion, if advisers already keep TCF and its principles at the core of how they operate, then there should be no need for change in the way that business is conducted. What consumer duty does is ask firms to go further than these principles and focus on good consumer outcomes.”
Communicating retirement plans
One thing advisers will need to address is how they communicate complex financial information to clients, as the consumer duty will ask advisers to ensure their clients understand the products and services they have been given, and to be able to evidence that.
“There is pressure to really explain things, it's probably higher than it was before," says language expert Neil Taylor. "So of course you know what an annuity is, you know what drawdown is, and you become fluent in that language, but other people might not be and we tend to overestimate how much non-experts get."
He says under the consumer duty advisers will have to consider whether they give their clients the right information, and the right amount of information, at the right time, and whether they can actually check whether their clients have understood the information.
"They're asking you to go out and research some of these terms and your particular audience and check that they really do [understand]," he says.
Tait agrees consumer understanding is a key outcome of the duty, and “advisers should take whatever steps they believe to be necessary to deliver their recommendations to clients in a way that that person is able to access and comprehend.”
She says for most clients this is likely to follow a standard model, making use of already available technology. But for those who find these methods difficult, it is the adviser’s duty to identify their vulnerabilities and set up alternative arrangements, she adds.
“This could involve the use of alternative media, for example large fonts or a personal reading service, or it may mean the involvement of a trusted third party. It should also be proportionate to the needs of the client, some of whom may face multiple challenges.”
Verona Kenny, managing director of intermediary at 7IM, says good practice will mean communication to clients goes beyond being fair, clear and not misleading, "to being relevant, engaging and, dare I say it, exciting – this is a client’s financial plan for their future after all."
She adds: "Listening to clients – vulnerable or otherwise – leads to understanding their goals, which is the first step towards achieving the best customer outcomes.
"At the same time, as a highly specialised industry, advisers should be able to communicate to clients the benefits and pitfalls of their choices, enabling all to make the choices that will work best for their circumstances."
