Video Uncovering the advice industry’s response to Consumer Duty

(00:00): Good morning and welcome to our latest regulatory webinar on the hottest topic in the industry right now, consumer Duty. My name's David Kerr, director of Platform Consultancy at Aegon. And I'm your host for today. I'm also joined by two industry experts, and we've got Steven Cameron public Affairs director at Aegon, and Heather Hopkins, who's managing director of Next Wealth. Morning to you both.

(00:26): Good morning.

(00:30): Really looking forward to this. So before we get going I just need to point out these are the learning objectives for the session today. So as long as we are clear, that's how you get your CPD certificate at the end. So let's get started. We've got a lot to get through in 50 minutes and that hopefully leaves time for questions at the end. So to ask a question, all you have to do is type into the chat. So the timing of this webinar couldn't really be any better. It's almost as though we planned it, not just because we are just three months away from full implementation for advisers, but there's also a key date that's only three days away from manufacturers. So all manufacturers need to provide distributors with the outcomes of their target markets and value assessments. So, as yet, I've only seen a few being made available around the market, but I can tell you that we are in the process of uploading all our documents to the consumer duty hub as I speak virtually all our products are now available. There's just a couple that we still got to do, and I can confirm all of these will be available by the deadline. So, Steven, on that positive note, can you tell everyone a little bit about today's webinar and our collaboration with Next Wealth?

(01:51): Yes. Thanks, Steven. And good, good morning, everyone. Yeah, I agree with you. The timing's perfect, isn't it? Three days to go. So on Sunday, we'll all be scrambling around looking for these outcomes of these value assessments, or maybe we'll wait till after the bank holiday weekend. Anyway, the background behind the session is that David, you and I and others and are going to have been out speaking to many, many advisers who are all very busy working on the final stages of implementing the new consumer duty. And we know that the FCA has produced huge amounts of material to read or to listen to on the consumer duty, but all of that's based on an outcomes focus. So it doesn't give specific detailed rules to follow. And in fact, because the consumer duty applies right across the retail market, and the rules don't always apply to every particular firm or sector.

(02:46): So there's a lot of interpretation required, even if you have read everything that the FCA has written. And we believe and speaking to advisers, this has been reinforced that we think it's really helpful for adviser firms to be able to also understand what their peers are doing in this regard. So firms like them, how are they preparing for the consumer duty? That might mean that they're changing some of the aspects of their business model or some practices. It could mean that the change in communications, for example. And there were a few themes which were coming up in conversations. One was about how to demonstrate value, whether that's explicit or, or implicit or intangible. Another is around potentially changing the way that adviser firms communicate with or engage with their customers. And another one was around the evidence that will be required for, for the duty.

(03:43): So that was when we thought, why don't we get in touch with Heather and Next Wealth to, we know that Heather, you spend lots of time talking to advisers, and the idea was to ask if you could collate or bring together the insights that you're getting from the adviser community about what they're doing in their businesses so that we could produce, or so that you could produce three guides for Aegon to then use with adviser firms to explain the sorts of actions that other adviser firms are taking. And the purpose of today is first of all, to launch those three guides, and also within this webinar to, to pick out some of the key points. And I know, Heather, you'll not be able to cover all the detail because there's a lot of, a lot of detail within these. One of the particular aspects I really like within the guides is that throughout, there are a number of boxes that include actions to consider for adviser firms. So we think this, these guides will have real practical support in this final stage ahead of the, the consumer duty deadline. And the good news is that you'll also be able to download those guides again from our consumer duty hub alongside being able to access the outcomes of our value assessments. Some of our colleagues, and they have been working for months on those value assessments, so they're delighted to be able to share the outcomes of those with the market right now.

(05:10): Thanks, Steven. I've read the guides and the insights are fascinating. So so if we just move on to the next slide. If we get started with the very first guide, Steven, how are adviser firms demonstrating value?

(05:26): So maybe just a quick recap on what the FCA is looking for before passing on to Heather to to share the findings of this particular topic. So the good news is that the FCA has moved away from any suggestion that value is just about price. Cheapest is not always best. So it's always going to have to be around comparing the overall price that the customer will pay throughout the, the lifetime of connection with the product or service against the benefits that they're likely to receive. The FCA suggests they don't require, but they suggest that as part of assessing value, adviser firms might want to consider the costs that they're incurring to deliver the services, and that they also might want to compare how much they're charging with others of a similar nature within the market. So Heather, I'm sure you'll have some, some findings on that.

(06:17): We've already highlighted the deadline of Sunday for manufacturers to share the outcomes of their product value assessments. And once these are available, advisers have a two tier role to play. First of all, advisers need to assess that their services, their advice services or other services on a standalone basis do stack up and provide feared value. But the second one, and perhaps the slightly more complex one, is because advisers are closest to the end customer in the distribution chain, they're tasked with looking right back across that distribution chain, looking at everything that the client will be charged, plus what they're charging to make sure that that still represents good value compared to the benefits. Couple of things, the FCA flagged in its guidance and final rules where a question mark over whether charging a percentage of fund and in particular the same percentage of fund for all clients irrespective of how much they were investing, did that represent fair value between customer groups?

(07:27): So something for us to consider. And the other thing that came out was that the FCA was talking about non-financial costs. So not just the money that the client will be expected to, to pay over, but the time that they might incur, for example, in engaging with a process. And I think that brings up the whole topic of non-financial costs, but also non-financial benefits. And we know that a lot of the benefits that advisers provide are intangible, they're not, they're not just around investment performance and tax saving. So we think that links into a debate around wider financial wellbeing. But that's probably enough for me. Can maybe hand over to you, Heather, to share some of the findings.

(08:11): Fantastic. Thank you, Steven. So we were delighted to be approached by Aegon to write these guides because in our research what we were hearing was a lot of uncertainty from firms about how to approach it and what they, what they needed to do. So we think it's a fantastic topic, and as we've all said, the timing couldn't be better when consumer duty was first announced, many advisers seem to be thinking that it was really just an extension of TCF treating customers fairly, but it's become really apparent over the last few months that it's much more than that. And you've detailed a lot of what's required already, Steven, which is really helpful. But everybody involved in financial services needs to address the regulation. Financial advisers though, are really in the eye of the storm because they're pulling together all of that information as they're the ones facing off against their clients.

(09:04): And so what we wanted to understand with these guides was the approach within financial advice firms to to complying with consumer duty and also to understand customer views. So we did extensive research, as you can see detailed on this slide, with both financial advisers and clients of financial advisers. So you know, quantitative research and qualitative interviews with over 700 advisers and their clients to really understand how they were preparing and, and how clients thought that the industry was already performing against some of the key metrics of the consumer duty. And the findings are really, really fascinating. And as you said, there's some good tips and, and call out boxes with things that advisers can really implement in their business. And it's designed to sit alongside all of the information that the FCA has been publishing and the guidance that they've been making available to help advisers learn from, from best practice and learn from each other.

(10:08): And in terms of, of what we found. So the, the first thing I want to focus on is adviser confidence. And the pie chart on this slide shows the proportion of advisers who felt fully confident, confident, somewhat confident in calculating total cost to their customers. And, we were actually really surprised by this. It was lower than we expected. Only a quarter of financial advisers said that they were fully confident that they could calculate the expected cost a customer will pay. And now this research was done at the end of last year. So you know it there, there'd already been about six months since consumer duty had been announced, but we think this has probably moved on. But the reason we were surprised by this is this is actually one of the things a lot of firms have already been working on.

(11:00): So half were saying they were confident, but only a quarter saying they were fully confident. We hope that that's probably moved on. But with the information they're receiving from providers this week we should see that number move up. And now if we look at, at how advisers are thinking about fair pricing you mentioned already Steven, that the, you know, the regulator's thinking about whether charging all clients a proportion of assets at a set, you know at a set amount is the right, is the right approach or a set percentage. And so we wanted to understand how clients viewed the charges that they're paying advisers. So when we asked to advised customers about basis point charging versus some other methods of charging, it was definitely a preference for basis point charging. And they actually appreciated the ongoing nature of the charges.

(11:58): Not that they want to pay on an ongoing basis necessarily, but they felt that that meant somebody was over it. And the reason they liked the basis point charge, it was really clear that they felt that they had an alignment of interest with their adviser, that the adviser is incentivised to grow the portfolio, their fees will increase as the size the portfolio grows is something we heard from clients. And they also felt that the adviser was spending time in the background looking at it. So if there's some, you know, news item that could, you know, scare a lot of people possibly cause some wake, you know, some sleepless nights for people advised customers felt, you know, my adviser's looking at it so I don't need to worry about that, that it wasn't something that they needed to nudge their adviser to look at.

(12:41): And that's a different relationship than they feel they have with their accountant or their lawyer where they have to ask the accountant to do a specific piece of work and that work is charged as it's done. But clients did find it difficult to objectively evaluate the value that they were receiving. And that was less about the initial advice, but more about the ongoing service. It wasn't that they didn't feel they were getting value, but they couldn't necessarily articulate specifically what advisers were doing and what value they were receiving. And I think, you know, in our interviews with advisers, what was clear is there's a lot of work done upfront to set expectations with clients about what's going to be done and what the value of that is to the client. And it's just important to be reiterating that in an ongoing basis. If you've been working with a client for a decade, then that conversation might have been really clear at the beginning, but maybe it needs to be articulated more clearly.

(13:32): The other thing I thought was really interesting is clients did not like an hourly rate. They didn't want to feel that they were on the clock if they called their adviser. And as I said, if they're watching the news, something comes up, they want to feel the advisers on it without them having to prompt the adviser to take a look at it. Now if we look at, at, I know a bit deeper on that, paying for ongoing support I mentioned that only half of advisers are fully confident they can track costs. But advisers are thinking actively about this one firm that we spoke to in Hertfordshire was saying, you know, we're always looking at costs, but consumer duty has brought an increased focus on this. They look at what value they're offering customers, what they're charging, if they're offering additional bespoke services to their clients, is the client getting value for that versus what they're paying?

(14:26): And so there's a real focus in firms on that. But increasing with the, with the consumer duty consumers really value that ongoing support and regular communication. And they want that long-term relationship with her financial adviser. There's a recognition, I think that some years you'll need more support than others. And I think that should play into how advisers are thinking about articulating value, because it's not necessarily that you'll need every year to be doing in-depth work for each individual client, but looking at that over time, but not too long of a time period. If that's fair. The other thing was that advisers were concerned that if clients with complex needs maybe should be paying more, I know that there's some questions about whether clients in accumulation maybe should be paying more. But it's difficult to think about how to navigate those issues.

(15:18): Because you don't want somebody to call and say, look, I'm going through a divorce, I need some help. And you say, right, we're going to have to charge you extra, you know, just as they're entering that period of particular vulnerability. So how to navigate those conversations can be quite, quite tricky. In terms of of how advisers are, are thinking about defining the value of advice. There was some really, really interesting commentary that came out of the interviews we did with advisers. They're definitely not equating value to performance. It's not just about financial metrics. It's definitely a component of it for clients. But if we look at these quotes from advisers one said, you know, peace of mind and trust is really important, but how do you demonstrate the value of trust? It's such a subjective thing that's incredibly difficult.

(16:11): Another one saying you know, some clients would just want to know, what have I got? Get a full picture. And what that might model out to look like in the future. Particularly, you know, as we've seen inflation coming back into play, it's really complex to figure out what that amount of money might translate to for future. An adviser saying, you know, can I, a client saying, can I afford to go on holiday? And how do you manage to articulate that as the value for the client? So my favourite quote from a customer is, I 100000000% sleep better at night because I know the adviser's on top of it. You know, but how do you quantify the value of sleeping better at night? This one at the bottom of client saying, you know, when his friends ask him about why he gets professional advice, he says, you know, yeah, I can hold a paintbrush, but should I be painting my house or should I use a professional?

(17:04): So, an interesting analogy to, for that client to think about it, but you know, that that concept that it's not just about the financial metrics, but what do you need to be looking at? It's not just satisfaction, it's not just performance. There's other things you need to be looking at around. Now when we talk about value, it's not just costs, you know, that's not the only input, but it is an important input. And the regulator has mentioned price and cost in a number of things that they published around the consumer duty. And it can be challenging for advisers to benchmark their own charges against other advisers because those aren't really publicly available numbers. In research we've been doing it at Next Wealth over the last couple of years we've been asking financial advice professionals about the average ongoing fee for advice funds, including transaction charges, portfolio management and platform.

(18:01): And the overall average is 168 basis points. Specifically looking at the advice fee, there's a lot of detail broken down in the guides that, that we've done for Aegon. So you can get those after the webinar. But there tends to be a clustering around 50 basis points, 75 basis points and a hundred basis points for that ongoing advice fee. It does vary by region. There's interesting regional differences, but hopefully this benchmark's helpful for you in your own reporting internally into the regulator to benchmark what is the overall fee my clients are paying versus average, and particularly that advice charge that can sometimes be hard to get benchmarks for.

(18:47): Thanks, Heather. All really interesting insights. And it does sound like there's still a lot of work to be done. One of the stats that really stood out for me is that only a quarter of financial advisers are fully confident they can calculate the expected total cost that customer will pay. Steven, what, what's your thoughts on that? And you got any other reflections on Heather's findings?

(19:13): Yeah, I agree with you. That was a worrying figure. And perhaps it's a reflection on the fact that maybe as providers and fund managers, advisers haven't been receiving the, the information that they need in a nice, clear, concise manner. So I do hope that the outcome of the value assessments that we've all been talking about when they go live, I do hope that might significantly increase that figure. I hope we'll see a significant uptick there. And in terms of other observations couple of things I often get asked by advisers if customer satisfaction surveys are the way to, to demonstrate value. And I do think obviously getting feedback from your your clients is really helpful. It's good for business. It's something that, that we should all be doing. But I suspect that the FCA probably wouldn't equate customer satisfaction. I'm happy with my service or I feel quite happy with delivering on good outcomes.

(20:12): So I think that customer satisfaction surveys might need to be tailored or, or refined to, to, to get to the heart of, of what the customer is actually getting. And, you know, asking less about are you happy? And more about do you feel that you're getting the outcome you are looking for from the service that we're providing? So that, that's, that's, that's, that's one thing. The fair approach to charging really interesting, Heather. I really, I think it's really helpful that we've got these figures now and this analysis of the fact that clients don't like, or clients would prefer to be charged on a percentage of fund basis rather than a time cost basis, for example. So we've got a bit of an issue there because the FCA is saying it may not be fair to charge your £50,000 client the same percentage as your £5 million client.

(21:07): And I think what that's pointing to is probably that we'll see the evolution of charging percentages which change band by band. So you might charge 1% number of basis points on the first, I don't know, 50 or a hundred thousand, but then a lower basis point charge on maybe funds above that. So that might be something going forward. And one final observation. The ongoing services that the value of ongoing advice. We all know that the FCA's got some concerns, particularly in the at retirement space that some clients might be paying for an ongoing advice service, which isn't of value. I think that's an area where it's going to be particularly important that we bring out all aspects of value, not just the financial aspect, so that peace of mind sleep at night aspect. So that's certainly something to consider.

(22:02): The charging point is a really interesting one for me, Steven is, so Aegon have got a price cap on platform fees, right? Which advisers and clients love, but we also have the ability for advisers to charge a percentage fee and cap the amount that we deduct so you don't go too high, but no adviser's ever used it. So I wonder if this option will start to become used more or as you say, advisers might start using different fee bands to resolve the issue. So we just have to wait and see anyway if we move on to the next area. So how are advisers approaching supporting consumer understanding? So again, Steven, tell us what are the FCA expecting here?

(22:49): Okay, so a quick run through and I should mention that we've got material on the hub that goes into each of the outcomes in a lot more detail in what we think the adviser implications for each of these are. But just a quick look at this one. It used to be called customer communication, but it's now called consumer understanding. It just kind of highlights the way that the FCA is looking more at the outcomes rather than the deliverables. So first of all we know that there is lots of detailed regulations right now about how we communicate with or disclose information to, to customers. A lot of that is driven by EU regulations and I'd say often that's less, less than helpful because it's so detailed. So I'm really pleased that the FCA has woken up to that and both treasury and FCA are now consulting on moving to a better disclosure regime.

(23:42): So, but that's for the future. Right now we can, we need to continue to comply with all that detailed regulation. But under the duty the FCA is saying, we should also step back and take an overview as to whether or not all of the information that we're conveying or all the ways that we're helping customers does actually aid their understanding and help them understand how they can pursue their own financial objectives. So I think this is an area that, that we're never going to be a hundred percent right. I think there's always going to be learning and improvements on an ongoing basis. Couple of specifics. One of the key ways in which advisers communicates understanding to their customers as three suitability reports, of course I think it's absolutely appropriate that many of those will be based on picking some standardised paragraphs. But maybe one to consider does the use of standardised paragraphs create too generic a document or, or is it still tailored to the individual needs?

(24:46): And if these become quite lengthy, and I know that they often do, is there is there a way of helping with navigation, for example, by bringing up out some of the key points upfront? Another point around consumer understanding is we know that one of the cross-cutting rules is around avoiding, causing foreseeable harm. So how will advisers go about explaining that foreseeable harm to their clients? Will that be something that will evolve over time? And under consumer understanding, there are two main types of communication. There's the one-to-one, and there's the kind of mass communications. I suspect that the advisers will probably spend most of their time in one-to-one relationships, unlike providers that where it's probably the opposite. So, you know, often these will already be tailored to individual needs, but there's a question over how do you check understanding perhaps as you go along and are there key points that you want to make sure the customer has understood?

(25:47): And how can you check that on an ongoing basis for mass communications? If, if using an adviser firm are sometimes issuing more general communications to, to many clients, then the FCA expectation there is that if it's an important communication that you should consider testing that in advance to check that it is truly understandable by your intended recipients. And also, again, if it's been an important communication, maybe carry out some post-test to check that it got the reaction or the behavioral response that you were anticipating. And if not, learn from that and improve next time round. So that's a quick run through of consumer understanding, but again, Heather, can I pass over to, to you?

(26:35): Yeah, perfect. Thank you Steven. So as Steven's outlined, the FCA is pushing for better and continuing communication between advisers and clients. But the research we did suggest there's probably more to be done and the, the chart on the right shows the level of customer understanding, and this is based on the survey we did with advised customers. So the share that say that they fully understood the different documents that they receive through the advice process whether that's directly from the adviser or by email or in the post afterwards. And less than half of clients say that they fully understand any of the materials that they're receiving from clients and advisers think that less than half of the information provided to clients is even useful <laugh>. So there's obviously some challenges here. And we do hear from advisers that sometimes just the volume of information they have to provide to clients can sometimes disengage clients a little bit from that process.

(27:40): They have a great conversation and then they need to give them a stack of paper and that and that doesn't feel, that's not the journey that those advisers want to take that client on. So it's something the regulator's looking at the volume of disclosure. But, but needless to say, there's probably more that can be done to simplify this. Now, as a caveat, I've done market research for quite a long time and, and I know that people are likely to say, yeah, I understand it. I mean, I'll be honest, I don't fully understand the KIID, right? So whether that many clients actually fully understand it, probably not. And when we did the qualitative in-depth interviews with clients, we found that their level of understanding was a bit more nuanced than this would suggest. And that's again, that importance of not just a survey that's, that's blank in taking that as read.

(28:31): Making sure that you're getting into a bit more of the detail. So what are advice firms doing to help improve understanding? I think one of the really important things that came out of the work we did with advisers and understanding how they're approaching this is understanding and context. So and that's something that, that, that Steven alluded to and thinking about, does it have the desired outcome and action from the client to indicate a level of understanding? So one of the things that, that some advisers are doing is, is having a survey or an interview with customers after they've had an interaction with the adviser so that that, you know, annual review is walked through with the client, they leave and a couple of days later they might have another interaction to just check the level of understanding so that it's understanding and context.

(29:20): Other things a lot of firms do is, you know, try to remove jargon as much as possible, have an executive summary that's provided with any documentation. One firm we spoke to was doing video annual reports so that they could have that in person or remote conversation to talk through things, but they also had a video that they could refer back to if they needed. So there was more of the advisers commentary and context offered. So you know what, whatever you do, of course disclosure rules need to be followed. But this will definitely be a work in progress across the industry, I think with lots of change over the years to come. And if we look at client understanding versus satisfaction, I think there's some really interesting insights here as well. The top on the chart, the top line is overall client satisfaction with their financial adviser with 7.8, but as Steven said, you know, that might not be the only metric that that firms should be looking at.

(30:21): So that's a strong level of performance across advisers. So that's fantastic and probably doesn't come as a surprise to anyone. And in fact, the FCA's own research suggests that the level of satisfaction for advised clients is quite high. It's slightly lower, but about the same 7.7 on the communication received. Don't worry too much that fees are lower. In market research, again, fees paid always get a lower level of satisfaction because people would always like to pay less, so, so that's not something to be particularly concerned about. When consumers describe the value of advice as peace of mind, trust and your contribution to their wellbeing, it's, it's, you know, that that challenge of trying to get, as Steven said, getting beyond that to really measure are you getting the outcome you expected from the financial advice and from your financial plan.

(31:15): So trying to get, get a little bit more detail. If we move now to foreseeable harm, this is a real focus that Steven mentioned in the intro for the regulator and it's, it's a slightly different way I think of thinking about things. So focusing on outcomes, but then also thinking about what are the potential foreseeable harms to across my client base, what are the things that could possibly go wrong and what are my firm's strategies to mitigate against that? It's almost that risk matrix that investment committees would have. What's the risk matrix that you should have in your business to think about foreseeable harms for your customers of financial planning? So a couple of things here. The chart that you're looking at is based on the survey we did with advisers, and we asked two questions around foreseeable harm.

(32:07): We asked about the advisers concerns were foreseeable harm for investors more broadly, and then we asked a follow up question to ask them how they felt about that for their own clients. And the orange is showing for the adviser's clients, and the blue is for investors more broadly, but it's all the advisers responding to this. So the top concern is regulatory requirements, increasing operational costs. So the cost of running a device business is increasing. And one of the key contributors to that is the cost of compliance, cost regulation. FSCS is typically included in that PI is often included in that. So that, that's one thing to acknowledge and advisers reference that against the backdrop of that second highest, which is the impact of inflation. So their costs running in their business are increasing, the potential returns for clients are you know, not as strong as they've been.

(33:00): And the work that their portfolios have to do for them is potentially growing as a result of inflation. So that's all, I think those are really important foreseeable harms for clients to be aware of. The other thing I want to mention here that I think is really, really interesting, and it refers to the, the difference between advised clients and investors more broadly and the perception of advisers is around risks. So the second and third factors on that chart, and that's where we saw the biggest difference. So when thinking about the value you're offering to clients, obviously understanding risk and the risk that clients should take is something that advisers see as a key value they're offering. Just looking at that delta between the risk profile for clients versus investors more broadly. So advisers are about 40% said that they were concerned that investors more broadly were taking too little risk.

(33:53): 32% saying they're worried about investors taking too much risk, but the number for their clients was much lower. Now, there was a quarter saying that they're worried about their clients taking too little risk and that probably relates to that point about inflation. The client might be quite risk averse, but how do you talk them through ensuring they're taking the right level of risks so that they'll be able to have the retirement or have the, you know, be able to achieve with their wealth what they're trying to achieve. And so if I just talking about, you know, it's not just sending out the attitude to risk questionnaire and applying that to a profile or a portfolio, it's making sure that's part of a wider conversation, but a key part of the value advisers are offering.

(34:38): Thanks Heather. Customer satisfaction versus value is definitely a tricky one. And helping avoid foreseeable harm. Steven, that sounds a lot like helping people picture the future sales, which is a key part of Aegon's work on financial wellbeing.

(34:56): Yeah, when I first read the the draft rules and guidance on the consumer duty, I did quickly sort of realise that there was quite a lot of links between the way that that Aegon describes financial wellbeing and what the consumer duty is looking to do. So we if, if anyone has heard Aegon talk about this before, we've got 10 building blocks for financial wellbeing. Some of them are linked to money, but others are around mindset. And one of the really important aspects of mindset is being able to picture your future self to know what will make you happy in the future. And to me it would be pretty difficult for an adviser to really get their clients engaged in potential foreseeable harms that might emerge in future years if the client just can't picture what their future self might look like. So I think there's definitely a connection and just this whole idea of thinking more holistically about, about the clients, not just financial goals, but maybe even life goals may be something that, that, that more advisers might want to think about.

(36:00): And, by bringing financial wellbeing in to the discussion with the client, it is another way of highlighting the breadth of value that that advisers do offer. So I definitely agree that, that there's a connection there. And this whole, this whole topic of, of foreseeable harm Heather, this came up in another joint piece of work that we did, didn't it? When we were looking at the, the, in the at and in retirement market and there we asked advisers what they thought the greatest foreseeable harms were in that particular advice scenario. And I think this is a topic in its its own right. I think that that's really interesting to, to see what different firms are identifying as the kinds of foreseeable harms that they might try to protect their clients from. I'm also intrigued as to whether or not advisers will start using that phrase with their clients or whether they'll come up with their own terminology.

(37:00): I'm sure it's something that advisers have always done looked at risks to the, to the clients in the future, but maybe haven't explicitly talked in those terms. So it might be that that shapes the way that that, that some of those conversations go. One bit of a concern that I have is that I don't think it would be good if we got, we all across our industry got so hung up on protecting from foreseeable harms that we forgot that it's just as important to help the client grasp the upside opportunities. So I do think it's about getting the balance right and being quite clear with the client, which foreseeable harms are most important to them, which ones they're trying to mitigate against, and what opportunities they're also trying to help the clients take advantage of.

(37:49): I totally agree, Steven. So moving on to our final section, evidencing and monitoring good outcomes, this one's particularly important 'cause all four outcomes require advisers to monitor and regular review what their clients are experiencing and act upon the feedback to avoid any harm. So Steven, what, what can you tell us about the FCA's expectations here?

(38:15): I think this is perhaps the area of where we all need to do things differently. It might be one of the biggest aspects of change across the whole consumer duty. So what we is really clear now is that it's not enough to deliver great outcomes for all your clients to prevent all forms of foreseeable harm, support them with the financial objectives. You must be able to demonstrate that you've done that and the mi that you use for that shouldn't just be transactional or based on inputs to processes. It truly should be demonstrating that the outcomes that the clients are receiving in practice are good outcomes. So that's quite a challenge. It is good that the FCA has been upfront and said not all firms will require the same MI they've said that will depend on the sector that you're in, the size of your firm, and therefore the the capability and the resources you have to generate MI but also on your client base, the types of products or services that you are engaging with. And as a result of that, the risks that they create. So lots of different approaches for different parts of the market. And the other thing that they've made clear is that because the only way that the consumer duty will deliver on its full potential is through collaboration. We've talked about the need for MI to be passed up and down the distribution chain. So, so again, that's one that's going to be interesting to, to see how, how that develops. So Heather, over to you.

(39:51): Great, thank you Steven. So that, that importance of demonstrating coming through really strongly but advisers are saying only 16% of advisers saying they're fully confident in their ability to collect and utilise data to identify and prevent foreseeable harm. So definitely a challenge for firms. I want to move now to thinking about target market because there's, this is a real focus for the regulator to do a target market assessment. But even with Target, with even with defined target market you know, firms are, they need to then think about how that maps to their process, their product range, their fee structure so to, to define those target markets and align that with the proposition that they're offering. When we asked advisers in our survey, if they had defined a target market only 20% said that they had to find a target market.

(40:53): When we look at that broken down by size of firm sole traders were much more likely to say that they had either not done it or they had a single target market in bigger firms. They tended to be further along that that course. Which makes sense because you can't sit around a table and agree what your approach is, but that, that requirement to evidence and document applies to all firms. So even if you're already doing it intuitively, it needs to be documented and you need to collect the MI to be able to support the action against that. So I think that's a really, really important thing that needs to to be done and probably more to be done. If we look at efforts to improve segment segmentation. Just moving on to the next slide firms are looking to do much more to segment their client base to better frame that target market.

(41:50): So what we're hearing from firms is that are already doing client segmentation or, or have done that target market assessment, is that they were looking to segment it either by life stage complexity of needs or servicing requirements. And I think reflecting about the cost of providing advice to those segments, they probably make sense the types of products you might be recommending, the platforms you might recommend would, would fit with those, those different segments. The other thing I thought was really interesting from the research was some firms looking at Origin of wealth or the adviser specialism. And so Origin of Wealth might be an entrepreneur who sold their business that might be a segment. Because those clients might be if you're, one adviser we spoke to was working with a lot of tech entrepreneurs, they tend to be quite tech savvy.

(42:47): They're interested in a slightly different investment proposition. They're also looking to invest the money that they've earned in other businesses potentially. Another one on adviser specialism I thought was really interesting was, you know, what, what is the focus of the adviser? So that's the defining what my target market is and what it isn't. And the specialism can help define what it isn't, which I think is an important exercise that that should be done. Not just what is my target market, but okay, well who doesn't fit into that target market can be an important question.

(43:20): Thanks, Heather. I I think this is a key area. Target markets and segmentation are areas that come up in virtually all my conversations with advisers. And I think that's reflected in the three guides as well. You know, target markets are mentioned in every single one. So Steven, you got any thoughts on that?

(43:39): Yeah, I'm with you. I think this is an area that lots of advisers are looking to delve more deeply into to understand what the FCA is is looking for. And at the heart of this, the FCA is saying whenever you're designing either a product or a service, then it should be designed for a particular target market or target markets. So that's where you need, you need to start from. And Heather, I liked your point there that you said that sometimes that's about explaining who is not in the target market. Consumer service would not be suitable, and that's something that, that in a outcome of value assessments that hopefully you'll all be downloading shortly. We have a section on that, so who is this targeted at and who is it not targeted at? And I think you'll find that, that some, again, Heather, you mentioned that some firms see, you know, we don't really have a target market.

(44:33): It's very, very wide. Fair enough. Others will have a much narrower focus. So the target market for a group personal pension or something like that used for auto enrollment at the client base, that's very, very wide. But if you're offering advice on defined benefit transfers, then you would expect that to be a much narrower and more specific target market with lots of negative target markets and lots of clients that you wouldn't have within your target market. And I also, I like the point you made about the fact that particularly if you've got a wider target market, you'll probably have segments within that that you might price differently. So this is where we come back to the point about, about deciding if a percentage of funds charging basis is appropriate right across your target market or if you might want to have different segments.

(45:25): And one other reflection on the whole MI debate, I do know that when you look back to treating customers fairly, it was one of the hardest things to do to come up with an MI set that worked for that. And I think it's going to be even harder to come up with one that works for the consumer duty because it is more outcomes outcomes focused, but hopefully the benefits of that won't just be compliance. They will be beneficial to, to businesses, to really assess where the value is, is being offered to really make sure that we're meeting our client's needs even better than we had before and on a profitable basis. So I think it'll be worth the effort. And I also think that you know, we all might put in place a set of MI on day one, but sometimes you don't know if that MI is right until you've been using it in practice.

(46:20): So it might be a case that we need to wait until we've been using it for a few iterations before we, we see if there's any scope for improvement. And one, one final point, I think it would be awful if everyone in the industry was asking everyone else in the industry for their own bespoke MI I think the whole industry would grind to a halt. But one of the benefits of platforms including the Aegon platform, is we can allow advisers to design their own MI reports through our report zone. So I think that might be a particular benefit of the platform market and helping advisers get information they require from the platform to help them fulfill their consumer duty responsibilities. So watch this space.

(47:10): Yep, spot on. So on. So we're now entering the final stretch. So you might be wanna be thinking about a question if you've not type one already three months to go, but the finishing line is now in sight. I have to say it does feel like a marathon already, but then we're going to get there. But it just feels to me that collaboration is a key to all of this. We need to work together more than ever. So Heather, did any of the research highlight anything on collaboration?

(47:42): A hundred percent. David, you're absolutely right. So one of the questions we asked was who will have responsibility to ensure against the four different outcomes of the, or the pillars of the consumer duties that customer understanding proposition, suitability customer service and fair value. And what you can see from the survey of advisers was that advisers feel, 90 plus percent feel that they have responsibility for ensuring clear communication that is understood by the customers that the proposition is suitable for that client, that the service level is appropriate in helping them to achieve their outcomes and that they're achieving fair value, but it's not advisers in isolation. There was definitely a sense that they would need to collaborate, as you said with the providers as it's, it's a partnership, right? You're working together to help that client achieve their outcomes. The adviser's, the one facing off against the client has the suitability responsibilities, but is working with their partners. So, so it's absolutely, absolutely a collaborative effort.

(48:51): Alright, look, it's been, it's been great getting the feedback from advisers and it just highlights of course that advisers are looking to provide us to support their obligations that, that makes perfect sense. So if you want to flick onto the next slide. So from an Aegon perspective we've already got a huge amount of support material available in the consumer duty hub which we're going to continue to update with any regulatory changes or alterations. But as well as that, we've mentioned earlier that we have all our target market information and value assessments available by the 30th of April. And what we've done is we bind these together along with information on vulnerable customers and other things that Steven had talked about those customers. That's not valid for into one easy document. So hopefully it becomes an easier job for you.

(49:44): We also have a full suite of MI available. It's even sent through report zone. So any data you need broken down on clients funds, products, fees, and many more different areas can all be accessed when you need them for whatever purpose. And lastly, we already have tiered and capped pricing available. So if that's required when you're doing your segmentation, then we can easily support that. So if we move on, just to finish off we said at the beginning, but we're making the Next Wealth guides available after this webinar, so all you have to do is log in and download them from the consumer duty hub, which is on screen there. One of the things I like most in the guides is the sections on action points. We've shown a few here, but you might struggle to see them on screen. But I would, I would suggest that you look at these 'cause it's great prompts in terms of what's required. Steven just kind of finalising or finishing off, you've got any final tips for the coming three months?

(50:50): So we've covered quite a lot already. Things that we've not covered that I would add. One of the things I like about the FCA's documents are that they have throughout them the list questions that they might ask of firms and that firms should be asking of themselves. There are 39 of them in total through the final non hand book guidance. And I would keep referring back to these because there's so much that you could read that sometimes difficult to make sure you're continuing to focus on what the FCA sees as most important. So in those final few months as you're finishing your implementation plans, I'd keep those 39 questions handy and just check, not all of them are relevant to all kinds of firm, but those that are relevant to you, check that by the end of July, you can answer them all so that if the c asks you've got a ready answer.

(51:45): And one of the first things we added to the consumer duty hub was we pulled them all together in one document and we've got a little space on the right hand side. So if you're old school and you want to print them off, you can write your your answers along alongside that as you go. But that, that would, that would be one tip. And really the, the, the other one I'd, I'd say is don't be complacent. The FCA's not going to come in all guns blazing on the 1st of August, but the thing that will, that will annoy the FCA is if any firm looks like they've just been too complacent and I've said, oh, you know, we are fine, we don't need to change anything. So I would really encourage you to, to make sure that you, you, you collect evidence of what you are changing, however little that might be, keep evidence of it and write it down, have board minutes that, that, that explain that. And also if you've had a discussion internally and you've concluded that you don't need to change something because it is already fully compliant, document why you've come to that conclusion. Because I think that will put you in good stead to show that so that you are taking this seriously.

(52:56): Great. So that's just come to the end of our session today. I'm quite happy to open up to questions. So Andrew, have we got any questions?

(53:08): Yeah, thank, thanks for that David. Maybe one for you, Steven, just off of that point

(53:24): You were just going through one of the advisers in the chat is basically detailing that she's got an old client bank, you know, on sort of different fee models, different propositions you know, and she's asked do they have to have dealt with all of those clients by the end of July or can it be a work in progress? And I think this goes into some of the things you were saying about you know, evidencing what you can evidence is there anything else we can add to that one?

(53:52): So the duty will apply to your future support of existing clients, so they are within scope. If products are closed to new business and there's no opportunity to renew them or to, to increment them, then there is another year before the industry needs to be fully, fully compliant. But yes, I'd be looking at that client base to identify are you confident that you are delivering fair value and good outcomes on a future facing basis, whether you need to do that for individual clients. I think it's more about looking at groups of customers and situations. So I don't think you'd need to evidence for every single client you have on your client base that you've done a thorough consumer duty review. But certainly you should be looking at the sorts of clients you've got and the sorts of scenarios and to, to consider where the foresee harms or where the key areas for improvement might be. One of the things that the FCA said in the portfolio strategy letters or the review of implementation plans, can't remember, which is they talk about prioritisation. So, you know if you've got lots of clients in one situation, it's more important that you prioritize reviewing any, any issues there or any improvements you'd want to make there as opposed to the odd client that you might have in a legacy product, but you can't ignore them completely.

(55:24): No. Wonderful. Thank you. Heather, I might just jump over to you quickly if I may. Couple of questions in the chat about some of the stuff you're talking about understanding and complicated documents and the like. We've got one of the advisers who's asked you know, they're coming across things like Ts and Cs and highly technical documents that clients are signing up to that, you know, can be 70, 80, 90 pages long. Was there, was there anything in the research about that at all?

(55:55): So we didn't specifically look at that, so we looked at the regulatory required typical documents that are sent out in the interviews. We did ask about about the, you know, wider set of communications around, and I think it's a real challenge because, you know, I don't know how many of you have, have agreed to Apple's, Ts and Cs I've never read them <laugh>, I just did a degree, which is probably, you know, not particularly responsible, but it's a reality of consumer behavior that we, we don't scrutinise these things and, and they are, they are very long. I think the way that firms are approaching it is doing a sort of a triage to look at what are the most important documents what do people need to be looking at and making sure that they're that they're, that they're flagging what needs to be looked at to their clients. Yeah, but no, it's not something we specifically looked at with Ts and Cs, but I think it's a real challenge, not just for financial services, but as part of this regulation. I understand why it's being asked.

(56:57): No, fantastic there a couple of minutes ago. So probably just one more question for the panel. I think obviously the new consumer duty heavily focuses on the retail advice sector. But is there, is there any impact maybe Steven or David not quite sure who wants to take this one. You know, whether, whether there's any impact on, you know, advisers who are looking after small workplace pensions, you know, is there anything we can take or learn from here? I can pick up on that one if you like, David. Yeah, so, so workplace pensions are included within the scope of the consumer duty. So group personal pensions are retail products. They're just basically a collection of personal pensions. So members of GPP have always been in scope and that that means that any regulated firm that's servicing and influencing the outcome of, of any member of A GPP is fully in scope.

(57:58): One of the things that Aegon lobbied for, because it didn't look right otherwise, was that we thought that members of of trust based schemes that were served by, again, FCA firms should also be in scope. So the likes of members of a master trust were receiving the same additional protection, if you like, from the consumer duty. So the, this applies to members of trust-based schemes as well. And in fact, even if you're preventing a service to, to a defined benefit scheme that could influence members if your FCA regulated, that's in scope as well. So if you're an adviser firm, even if you are simply advising the employer and don't have any direct contact with the employees, if you are regulated by the se I think it would be very difficult and probably not worth the effort to try to say that you don't have any influence on member outcomes. So, so my take is that if you're active in that market, you should be fully embracing the consumer duty principles and broad outcomes within your work for, for whether it's a small workplace pension or, or a large workplace pension. I, I would just, I would just bite and go and embrace that fully there too.

(59:27): Thank you. I think we'll close the call there. It just leaves it to me just to thank Steven and Heather once again. And thank everybody else who dialed in has given up the time for the session today. We do really appreciate your support and hope you found it valuable. Thank you.