The cost to deliver advice should be the key driver to adviser charges under the Consumer Duty’s price and value outcome, according to Paradigm Protect.
The distributor highlighted key questions the Financial Conduct Authority (FCA) has suggested firms ask themselves, such as if different prices are being charged to separate groups of consumers for the same product or service, and if the firm is satisfied the pricing is fair for each group?
Mike Allison, director of protection at Paradigm Protect, (pictured) emphasised that while advisers could charge different consumers different prices, the key driver will be the cost to deliver that advice.
Speaking in its video update for intermediaries on preparing for the Consumer Duty, Allison gave an example of a firm charging a fee for giving advice on term assurance for a couple who both needed half a million pounds worth of cover.
“Of course you could charge Mrs Jones more than Mr Smith if say for example it was a relevant life or a key man policy, or a partner or director business protection insurance and there was more time spent on gathering the data, liaising with firms or the partners and directors in the firm – perhaps giving advice on the relevant trusts to be used,” Allison said.
“Whereas Mr Smith, if he just needs a straightforward life policy, you couldn’t justify the same fee. The key driver is that the charge should be driven by the cost to deliver the advice,” Allison added.
Review data and customer feedback
He also referred to the data, management information (MI) and other intelligence firms should be using to monitor the fair value of products and services on an ongoing basis, how regularly they are reviewing this material and what actions are being taken as a result.
Allison explained the regularity of review will depend on the firm’s size and resources.
“Some firms may want to do it quarterly, others half yearly, perhaps as part of their half year review with Paradigm,” he said.
“What actions they take will be documented in the senior managers’ meetings and the Consumer Duty report which obviously has to be produced annually.”
Allison added in terms of the MI collected, this will also depend on the firm’s resources.
“High consistency will generally indicate a good outcome and low complaints will generally indicate a good outcome,” he continued.
“Feedback from staff, manufacturers and of course customers can all indicate good outcomes are being delivered and should also be part of their annual report on the implementation of Consumer Duty and their business.
“In seeking customer feedback, you could target any clients identified as vulnerable and ask them, without saying they were classed as vulnerable of course. Firms may then go on to make changes to their vulnerable clients policy.”