Consumer Duty three years on: obligation to opportunity

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July marked the third year since Consumer Duty came into force. We reflect on the opportunities it has presented for advisers.

Before Consumer Duty came into force in 2023, the industry spent a lot of time preparing and analysing what it could mean and how things would change. For firms up and down the country, it meant significant preparation: process reviews, new documentation and mapping advice journeys. Three years on, we can start to reflect on how the regulations have shaped advisers’ business practices and client relationships, and the impact those changes have on customer outcomes.

Setting a new standard

The aim of Consumer Duty was to set a higher standard for advisers, with a laser focus on achieving better customer outcomes. Crucially, those outcomes weren’t just for at the point of sale - but throughout the entirety of the customer relationship. To achieve this, the Duty mandated four outcomes: products and services that meet customers’ needs; fair price and value; consumer understanding; and consumer support. In practice these mean more than just providing information - it’s sense-checking everything with the client, playing back your conversation, and checking in long after that initial interaction to make sure they still feel supported.

Many advisers will notice that not much has really changed - Consumer Duty merely gave them a framework on what good advice already looked like. The post-Consumer Duty advice world may play out as a feeling of strengthened trust and tailored conversations. While there was lots of preparatory work beforehand like introducing new customer checkpoints, updating suitability letters and reviewing customer-facing documents, hopefully you’re now starting to see a return on that investment: strengthened customer relationships, structured processes and a trail of evidence documenting the journey, with an increased confidence that your customers understand their products and their options.

Ongoing opportunities

One of the main principles of Consumer Duty was that good outcomes must be on an ongoing basis. The advice journey is a journey - not a one-off transaction. Customer lives aren’t static, so neither should their financial advice be. As life moves on, customers face all kinds of events - a desire to have children or to financially support grandchildren; the financial impact of bereavement or divorce; or a diagnosis that forces unplanned decisions about later life care. Just one of these events can change the suitability of their existing arrangement.

Consumer Duty ensures advisers remain proactive with regular reviews to help ensure customer needs are still being met. But it’s also an opportunity for advisers to check that customers understand their existing arrangements, and update their understanding where needed. Advisers that do this are building the long-term relationships that generate trust, foster retention and attract referrals. This can be especially commercially valuable in the later life market.

For advisers with lifetime mortgage customers, it’s possible their needs may have changed in the few years since their mortgage was implemented. It’s an opportunity to re-engage and give customers the ongoing support that Consumer Duty calls for.

Drawdown debrief

Now could be a good time to go through your client book to look for customers who haven’t accessed their facility or been in contact for at least 12 months, or who took their mortgage around the time Consumer Duty came into force. It’s an opportunity to check in and schedule a review call. They may need a reminder of how their drawdown facility works, or to be reassured they’re making the most of their available options. Or it could be an opportunity to reassess whether their circumstances have changed and if additional funds could support their changing needs. A simple conversation not only keeps you compliant, but could help you deliver even better outcomes.

Supporting your journey

Our experts at L&G are here to help you identify opportunities across your client base. Speak to your L&G BDM to arrange a firm health check and explore drawdown opportunities within your client portfolio.

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