In its response to the FOS Consultation ‘Charging Claims Management Companies and other Professional Representatives’, PIMFA argues that whilst the decision to levy a fee to CMCs is welcome, it will not achieve the policy objectives set out by the government when this power was given to the FOS.

PIMFA argues that a case fee of £250 for CMCs and Professional Representatives does not act as a disincentive to bring forward targeted block cases against firms that have little chance of success.

In its response, PIMFA suggests that FOS should review its approach and seek to levy a higher charge, which would result in firms and CMCs sharing the burden of case fees. Assuming a case fee of £900 as outlined in the consultation proposals (£250 case fee for the CMC and £650 for the respondent firm), PIMFA suggests a 50-50 split between both parties, meaning that respondent firms would be required to pay £450 as would CMCs and professional representatives.

PIMFA believes that in doing so, the FOS can put forward a framework which is more equitable for respondent firms whilst also recognising the limited role that CMCs play in advancing cases on behalf of consumers.

PIMFA is unconvinced that raising case fees for CMCs would result in consumer detriment, given that there is little evidence that the use of a CMC results in a demonstrably better outcome for consumers. It would also point to the presence of a fee cap for CMCs regulated by the FCA as evidence that the case fee would not be passed on to the end consumer. In considering this point, PIMFA would also urge the Solicitors Regulation Authority (SRA) to accelerate its plans to adopt a regulatory framework for CMCs which mirrors the FCA.

Simon Harrington, head of Public Affairs at PIMFA, said: “We would never advocate for the FOS to be anything other than free of use for consumers. It plays a valuable part in the financial services ecosystem, and we will always defend the right of consumers to access it.”

“In accepting the principle that the FOS is and should always remain free to access for consumers, we find ourselves questioning why it is that CMCs should be able to insert themselves into a process for their economic benefit where there is little evidence to suggest that their presence is in any way contributory towards consumers receiving a good outcome.”

“Whilst we are pleased to see that the FOS has accepted the principle that CMCs and professional representatives should be required to contribute towards case fees which they bring forward, we strongly believe that the FOS should review its proposals in order to set out a more equitable settlement between CMCs and respondent firms.”

“The FOS has a unique opportunity here to be bold and address the economic imbalance which currently exists between CMCs and the financial services sector. In doing so, the FOS can set out a framework which is equitable for firms and recognises the roles of both parties as ‘customers’ of the FOS.”

LGT Wealth Management picked up a trio of gongs at the ceremony, while HSBC, Legal & General Investment Management and Lloyds were also recognised for shining a light on “excellent, often untold stories that exist across organisations and among individuals in the wealth management and advice industry,” said Pimfa (Personal Investment Management & Financial Advice Association).

Liz Field, chief executive of Pimfa, commented: “I am delighted, as ever, to congratulate both the winners and highly commended from this year’s D&I Awards, but also all those who entered the awards this year.

“The business, moral and social case for diversity and inclusion has not dimmed, nor shall it for some time to come, and the firms and individuals that entered this year’s awards are all excellent examples of how our members recognise the talents of individuals from all backgrounds and ensure that all people feel involved, valued, respected, treated fairly, and embedded within the cultures of the organisations they work for.”

The winners of the awards, for which MA Financial Media titles ESG Clarity, International Adviser and Portfolio Adviser are the exclusive media partners, in each category are as follows:

Inclusive Talent Management Award

• Winner: LGT Wealth Management

• Best D&I Initiative Award (1-50 Employees)
• Winner: The Verve Foundation

• Best D&I Initiative Award (51-350 Employees) – sponsored by Royal London
• Winner: 7IM

• Best D&I Initiative Award (351+ Employees)  – sponsored by SEI
• Highly Commended: Legal and General Investment Management
• Winner: Lloyds Banking Group

• Best Industry Partner Award
• Highly Commended: Women Returners
• Winner: EY Foundation

• Rising Talent Award – Sponsored by Raymond James
• Winner: Nalini Solanki, Legal and General Investment Management

• Best Approach to Wellbeing Award – sponsored by Charles Schwab
• Winner: FIS

• The Overall DE&I Champion Award – sponsored by Morningstar
• Highly Commended: David Coombs, Rathbones
• Winner: Fiona Wallace, HSBC

• The DE&I Executive Sponsor Award – sponsored by Clearstream
• Winner: Phoebe Stone, LGT Wealth Management

• Best Organisational Outreach Initiative Award – sponsored by FIS
• Highly Commended: Future Frontiers
• Winner: LGT Wealth Management

Pimfa chief executive Field added while there is still work to be done “it is heartening to see just how much effort is going into making our industry as diverse and inclusive as it can be”.

“As the voice of our industry, Pimfa will continue to make D&I a priority and look to collaborate across the sector to provide resources, support and co-ordination of efforts in the years to come,” she added.

The winners were chosen by an independent group of industry peers alongside experts in diversity and inclusion from charities that Pimfa partner with. These included Roopalee Dave, partner at EY; Peter Moores, chief executive of Raymond James; Matt Cameron, global managing director at LGBT Great; Bev Shah, co-chief executive & founder, City Hive; Jennifer Mathias, group chief finance officer at Rathbones;  Sean Taylor, director at Canaccord Genuity Wealth Management; Richard Wilson, chief executive officer at abrdn Personal Wealth and interactive investor among others.

Huge congratulations to all the winners!

The annual survey, produced in association with the Chartered Institute for Securities & Investment (CISI) and the Personal Investment Management and Financial Advice Association (PIMFA) revealed more advisers are looking to sell up, with 16% saying they plan to sell or exit the market in the next 18 months – up 5% year-on-year. Almost half (48%) have been approached by a potential acquirer.

The report also indicated that clients are thinner on the ground. The number of advisers working with more clients than in the previous year has dropped from nearly half (46%) to below a third (29%). Almost a fifth (17%) have fewer clients than last year, compared with 5% in 2022.

The cost of advice is meanwhile dropping, having fallen from 1.98% to 1.75% in the past year. Four-fifths (81%) of firms are now charging on a percentage of assets either all or much of the time, the report showed.

Just under half (45%) of advisers use a managed portfolio service and a fifth (22%) expect to increase their use of this. An average 8% of clients’ assets are invested in cash and more than a quarter (28%) of advisers expect their clients’ cash holdings to increase over the next year.

The survey found more than a third (38%) of advisers think Consumer Duty will have no impact on their business and that almost half (46%) use cashflow modelling to evidence the value of advice.

‘Actively considering’ AI

When asked about the technology they use, 43% of respondents expressed themselves satisfied with their tech ‘stack’ – up from 38% in 2022 – although, at the same time, the number of advisers planning to discontinue one or more technology partnerships rose to 11%, from last year’s 4%.

Nearly half (44%) said that preparing the client report is the step that takes the longest in the annual client-review process. It is taking less time to prepare for the annual review meeting, however, with 4.6 hours the average, compared with last year’s 5.5 hours. More than half of respondents were receptive to further technology development – 59% saying they are actively considering AI or are open to seeing what might come to market.

Firms describing their client-facing staff as ‘financial planners’ increased their client base more than firms using the term ‘financial advisers’. More than a third (36%) of planners saw an increase in the number of clients at their firm, in comparison with 21% of advisers. The report also found planners tend to have higher qualifications and wealthier clients, while firms using the term ‘planners’ tend to be more positive about the future than ‘advisers’.

More than half (58%) of ‘planner’ respondents plan to grow by increasing assets, compared with 38% of advisers; 59% plan to expand their client base in comparison with 46% of advisers; more than a third (34%) are looking to increase staff numbers, compared with 18% of advisers; and almost double (17%) the amount of planners compared with advisers (9%) aim to grow by acquisition.

‘Eye of the storm’

“Between tepid markets, rising interest rates and consumer duty, financial-advice firms are having a rough ride,” said NextWealth managing director Heather Hopkins (pictured). “Review meetings are harder and many advisers tell us they have seen their first unhappy clients. Financial advice firms may be adding more value now than ever but rightly or wrongly, clients often judge firms against relatively short-term investment performance.”

She added: “Whether financial advisers are in the eye of the storm caused by continued regulatory disruption, coupled with weak markets and higher interest rates, or they are just battening down the hatches and the worst is yet to come, we think firms are well set up for growth when markets recover. Firms have honed their tech, refined their business models and are putting more resource into client recruitment.”

CISI assistant director, financial planning and education development Sally Plant meanwhile observed: “This  report provides some stark findings regarding selling up, attitudes towards consumer duty, AI and the fact that the cost of advice is falling.

“From the perspective of a professional body, however, the most compelling finding is the clear distinction between ‘planners’ and ‘advisers’. The fact that firms using the term ‘planners’ for their client-facing staff were found to be more positive about the future than those describing themselves as ‘advisers’ will be good news for financial-planning clients.”

For her part, PIMFA chief executive Liz Field noted: “The previous 12 months has seen a significant upheaval in this market and we had been concerned that firms had been forced to put some plans on hold in order to grapple with the weight of regulatory change. The findings of this report show this is an industry that continues to move forward – albeit in the face of some challenging conditions – build for the future and show resilience.”

While a majority of firms have heeded the Financial Conduct Authority’s (FCA) advice that the Consumer Duty represents “a watershed moment” that they should take seriously, there may still be a few firms that have yet to act.

As has been warned before, the FCA’s expectation is for a cultural shift where the firm’s mindset and all product lines are aligned to deliver good outcomes for consumers. Existing product governance, code of conduct frameworks, and vulnerable customer strategies can provide a foundation for firms to build on to meet the requirements of the duty.

Alexandra Roberts, head of regulatory policy and compliance at Pimfa, said: “With just 28 days to go until the Consumer Duty comes into force it really is time for firms to make sure they are ready, or at the very least, on course to be ready by 31 July.

“Firms have been warned before, but it bears repeating that the Consumer Duty is not just an extension of Treating Customers Fairly. The Consumer Duty will bring about fundamental changes to the way in which firms are supervised and regulated and requires a cultural shift in attitudes.

“If any firms still need help there are lots and lots of resources on the Pimfa website but the team and our associate members are also happy to help so please use the information and resources available to ensure you meet the deadline.”

10 recommendations

In other news, pension firm Aegon has produced a set of 10 recommendations specifically for advisers around the FCA’s Consumer Duty.

Aegon’s 10 recommendations are as follows:

• Evidence delivery of implementation plan;
• Review the FCA’s 39 example questions;
• Document your target markets and segmentation;
• Finalise value assessments;
• Check your Management Information (MI) against the FCA’s suggestions list;
• Formalise your approach to vulnerable customers;
• Review your customer feedback;
• Read the latest FCA material;
• Keep prioritising; and
• Get your records in order.

Steven Cameron, pensions director at Aegon, added: “With the FCA’s Consumer Duty July deadline fast approaching, and with so much material provided by the FCA, it can be hard to see the wood for the trees.

“The Consumer Duty further reinforces the need for providers like Aegon to collaborate with advisers. Building on the many adviser discussions we’re having, we have a number of recommendations to make.

“In this final stretch, advisers will want to make sure they have all the necessary evidence in place. I’d recommend documenting not just what changes you’ve made, but also where you’ve considered an aspect of your business and why you concluded it already meets the duty requirements. It would also be helpful to have a formalised record of how you identify and adapt your services where customers have characteristics of vulnerability.

“Once the duty is live, the FCA is likely to take a particular interest in adviser value assessments, target markets and approaches towards segmenting clients. All of this should be documented and reviewed on an ongoing basis.”

The new rules, which will come into force on 8 October, mean crypto firms must ensure that people have the appropriate knowledge and experience to invest in crypto.

In addition, those promoting the asset must also provide clear risk warnings, and ensure adverts are “clear, fair and not misleading”.

‘Refer a friend’ bonuses will also be banned under the new rules.

Sheldon Mills, executive director, consumers and competition at the FCA, said: “It is up to people to decide whether they buy crypto, but research shows many regret making a hasty decision. Our rules give people the time and the right risk warnings to make an informed choice.

“Consumers should still be aware that crypto remains largely unregulated and high risk. Those who invest should be prepared to lose all their money.

“The crypto industry needs to prepare now for this significant change. We are working on additional guidance to help them meet our expectations.”

Ownership

The FCA has estimated that crypto ownership has more than doubled from 2021 to 2022, and with 10% of the 2,000 people surveyed saying they own crypto, much of the industry is in agreement with the principle behind this regulation.

Rio Stedford, financial planning expert at Quilter, said the announcement brought some welcome reassurance that those who do not understand the risks of investing in crypto, but are lured in regardless, will be better protected.

Stedford argued while some have made money through investing in cryptocurrency, they are taking a “real gamble”, especially the more inexperienced investors, who are more vulnerable to the promotions regularly seen on social media and elsewhere.

Meanwhile, Myron Jobson, senior personal finance analyst at Interactive Investor, added it was high time cryptocurrency marketeers were brought to heel, having previously operated outside the regulator’s framework.

He argued: “Cryptocurrency advertising often paints a vibrant picture, focusing on the allure of potential riches while conveniently sidestepping the intricacies and risks that underpin the crypto market.

“Without a firm grip on the reins, advertising in the crypto realm has become a wild west of dubious claims and misleading information. Unscrupulous actors have exploited the regulatory vacuum to peddle false promises and entice unsuspected victims into unwise and sometimes outright scam investments.”

Hargreaves Lansdown’s head of money and markets Susannah Streeter said new customers starting to speculate in crypto would benefit from the 24-hour cooling-off period: “Such is the volatile nature of the crypto markets that coins and tokens can plummet in value in a matter of hours – but it means novice users of exchanges could back out within the set timeframe, if they get cold feet and realise they don’t have money they can afford to lose.”

Concerns over FCA classification of crypto assets

While most agree with the principles of the new rules, trade association Pimfa has warned of a ‘halo effect’ resulting from cryptoasset’s classification as Restricted Mass Marketed Investments.

David Ostojitsch, director of government relations and policy at Pimfa, explained: “Classifying crypto-assets in such a way runs the risk of creating a ‘halo effect’ that may benefit some associated digital assets, leading consumers to assume they are safe assets to invest in or covered by some form of redress if consumers lose money. Neither is true.”

Ostojitsch said there is clearly a future role for crypto-assets, but only if they are marketed appropriately and to the right people.

“There is a significant danger here that consumers will assume crypto-assets are safe because they are being marketed by an FCA-regulated person or firm. Again, we would stress this is not the case,” he concluded.

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