According to Bankhall’s client relationship director Linda Preston-Todd, one of the most popular questions being put to the team by advisers is how to evidence customers’ understanding of recommendations.
She said: “A good starting point is to have a standard list of questions to ask each client after they’ve engaged with their adviser. For example: What were you recommended? Do you know what our costs are?
“Do you know what we are / aren’t able to offer you? Every client’s needs will be different, but asking broad questions such as these will provide a means of drilling down into what someone took away from a conversation and provide peace of mind that everyone is on the same page. It can also help identify trends with similar types of clients, which can be used to inform ongoing training and development needs.”
Preston-Todd added that sending an online survey or having another staff member make follow-up calls could be “both simple – but effective – ways” to make gatting information a normal part of working practice.
Determining vulnerability
Another popular question is how to determine customer vulnerability, with Preston-Todd noting that clients should be “encouraged to view vulnerability as a spectrum of risk.
She continued that the Financial Conduct Authority (FCA) had identified four key drivers of vulnerability: health, life events, resilience and capability.
“’Health accounts for conditions or illnesses which might affect a customer’s ability to carry out day-to-day tasks, while ‘life events’ cover things like bereavement, job loss or a relationship breakdown.
“‘Resilience’ considers factors which may impact someone’s ability to withstand emotional or financial shocks, while ‘capability’ focusses on those with limited knowledge of financial matters or low confidence in managing money, as well as other relevant areas such as literacy or digital skills,” Preston-Todd explained.
She noted that being vulnerable did not mean someone was unable to take advice but that the adviser “needs to make certain their service can be tailored to suit people’s specific characteristics”.
“It’s therefore essential to ensure all staff are trained to identify signals and signs of vulnerability and where to signpost people for additional support, as needed. Ultimately, firms need to be able to evidence that they’ve asked the right questions to gain the necessary understanding,” Preston-Todd added.
Measuring fair value practically
Preston-Todd said that advisers also asked questions around how to practically measure fair value, which is one of the core pillars of Consumer Duty.
She explained that a key element of measuring fair value was “setting out information such as how a service or product has been priced, why it has been set at that price, exactly what benefits the service is delivering and what the cost of delivering it is”.
Then the adviser should take a “bird’s eye view” of the end-to-end customer journey and question how “easy and efficient” it is for the adviser and client at each stage.
Preston-Todd continued: “Don’t be afraid to engage with existing customers for feedback here as to what they perceive as providing value and what doesn’t.
“Fair value is a complex area that many firms are struggling with, so to help with this service providers such as Bankhall have a range of support solutions available, including interactive calculators, to help measure and validate.”
Foreseeable harm and protection
Preston-Todd continued that brokers were also concerned that they could be at risk of causing foreseeable harm if a customer did not want to have a conversation around protection.
She said: “As any good adviser will know, there’s little point accumulating wealth if you don’t protect it. But a fact of life is that not every client will be open to talking about protection. Where this is the case, the key thing is ensuring any conversations – and the output – have been reflected in a firm’s suitability report or other client documentation.
“Ultimately, as long as an adviser can show they’ve looked to educate the client and give them information to reflect on, they’ve fulfilled their responsibility.”
Small firms looking to prioritise
Preston-Todd said that small adviser firms were asking about where they should focus their attention as their resources were more limited.
“Providing adequate evidence is going to be a key challenge for smaller advisory firms, as there won’t necessarily be dedicated people on hand to manage this. Most one-to-two-person firms are unlikely to be taking on swathes of new clients, so what’s most important is collating as much data as possible on the core service being provided.
“Above all else, smaller firms must ensure they can demonstrate how their service has been designed to suit their existing customer base, and support with tangible evidence on how it adds value,” she noted.
Preston-Todd concluded that Consumer Duty was the “most significant regulatory change our industry has seen in over a decade.
“It’s imperative adviser firms ensure they are 100 per cent ready by focusing their attention in the right areas in the run up to implementation. This might seem a daunting prospect as the clock ticks down, but there’s lots of support available and embracing the changes offers a great opportunity to ensure services and processes are delivering the best possible outcomes to customers,” she added.
