85% of UK
financial advisers report feeling the impact of the new Consumer Duty
regulations. At the same time, they are increasingly turning to new
technological solutions to cope with the tightening regulatory environment and
moving their focus to clients with deeper pockets.
UK Financial Advisers
Adapt to Regulatory Changes
The latest
2024 UK Adviser Technology and Business Report released by research firm
Investment Trends highlighted the profound impact of Consumer Duty regulations
on the industry. The in-depth study of 1,252 financial advisers conducted
between February and March 2024 showed that 7 out of 8 advisers reported adverse
effects of these regulations, leading to more rigorous record-keeping and
intensified client interactions.
Additionally,
a third of advisers have adjusted their pricing models to demonstrate value for
money, reflecting a proactive adaptation to regulatory expectations.
“Consumer
Duty regulations have resulted in profound changes across the financial advice
sector,” said Lorenzo Vignati, the Associate Research Director at Investment Trends.
“With the majority of advisers reporting significant impacts on their
operations, we’re witnessing a shift towards more rigorous compliance and
client-focused strategies.”
The study
also highlights a strategic shift in advisers’ client focus, with a growing
emphasis on high-net-worth (HNW) clients to maintain stable inflows. As a
result, the average number of active clients per adviser has decreased over the
past year.
“This
reduction reflects a strategic narrowing of client bases to those that are more
profitable,” Vignati stated.
Consumer
Duty regulations, which came into effect last summer, aim to ensure financial firms deliver good outcomes for retail customers. Firms must act in
good faith, avoid foreseeable harm, and enable customers to pursue their
financial objectives.
Advisers Embrace Tech
Solutions
The report
also reveals a growing reliance on technology among advisers seeking to improve
business outcomes. However, satisfaction with existing platforms has declined
sharply, with only 12% of advisers rating their main platform as “very good,”
down from 21% the previous year. Poor service levels and cumbersome
administrative processes are cited as the primary reasons for this decline.
In response
to these challenges, advisers are exploring new technological solutions, with
the average number of platforms used per adviser increasing from 2.4 in 2023 to
2.7 in 2024. This trend signals a broader acceptance and need for diverse
technological solutions in the industry.
“Advisers
are increasingly turning to technology in pursuit of improved business outcomes,”
added Vignati. “However, our findings show a sharp decline in satisfaction with
existing platforms, underscoring the urgent need for platforms to enhance their
service and usability.”
The UK
advisers and asset managers industry was also the subject of the latest speech
by Ashley Alder, the Chairman of the Financial Conduct Authority (FCA), this
week during the Bloomberg Buy-side Forum. Regarding technology, he mentioned
that there is growing interest in the topic of potentially tokenizing funds and
the potential benefits of such a solution.
A few
months ago, the FCA checked how
financial firms were coping under Consumer Duty, in light of the issues
that the new regulations had caused for both the regulator and the licensed
entities.
This article was written by Damian Chmiel at www.financemagnates.com.
