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However, the impact of the Duty extends beyond advisers. Paraplanners have a critical role to play in facing up to the challenges it brings. How so? Well, let’s first recap on the aims of the Duty.
The primary Consumer Principle behind it is that a firm “must act to deliver good outcomes for retail clients. This has been broken into three specific rules about how firms behave towards retail customers. They must:
The rules apply across four named “outcomes”: Products and Services, Price and Value, Consumer Understanding and Consumer Support.
While paraplanners could conceivably get involved in helping their advisers to meet all four outcomes, it’s especially the case in Consumer Understanding. Because in every firm, paraplanners have a central role in making sure clients truly understand what they are being told and sold.
For one thing, paraplanners typically write the suitability reports which are a critical touchpoint for clients. If suitability reports are written well, enabling clients to make better informed decisions, then a key objective Consumer Duty is being met.
We’ve browsed the FCA recommendations and compiled a handy list of tips that you can review to further strengthen your client communications.
Technical financial language shows you understand, but it is less likely to be understood by clients.
Make sure that the top layer contains all the essential points – attention spans drop as clients read through long reports
You can edit out irrelevant fields from generic templates to unclutter them and personalise the communication to the individual client.
Graphs and other visual aids make information easier to digest and remember
Lead your client’s eye with relevant subheads, bullet points, and key numbers
Abbreviations for products or industry bodies should be avoided – never assume readers know what you know. Consider including a glossary for complex communications
This lets the client confirm they have understood and creates FCA-friendly evidence.
Examine all links to ensure the language used in destination pages is consistent with the language you use in your communication
The Duty recommends putting yourself “in your client’s shoes” when writing to check the comprehensibility of what you’ve written.
This applies at a more general level too, with the FCA requiring that firms “tailor” all communications to clients.
Write with awareness of an individual’s needs (what information they need) and abilities (how capable they are of understanding it), as far as possible. This is vital with vulnerable customers.
You need to be able to address different target market groups differently e.g. using simpler language for mass market products.
It’s important to communicate clearly if a client needs to take action to avoid financial harm, providing clear instructions and contact details.
You must be aware of the product’s lifecycle, especially at critical times such as contract breakpoints.
The Duty requires that adviser firms must monitor all their communications and regularly test their efficacy. Paraplanners can help by arranging surveys, interviews, A-B tests or even focus groups to test and report on consumer understanding.
Finally, paraplanners also have a role to play in establishing that clients have received “fair value” for the money they pay. This is big part of the Price and Value outcome and perhaps the hardest to prove to the FCA’s satisfaction.
For one thing, paraplanners should continue to perform due diligence when writing up recommendations.
If a paraplanner has doubts about the kind of investments being offered, for whatever reason, they should raise the issue with their advisers. Paraplanners can and should play a proactive role in refining what a firm offers its clients.
Further to that, the FCA is asking for evidence of fair value being supplied.
PROD and Services & Fees disclosure documents will help, but the Annual Suitability Report for each client is another big opportunity to establish value.
Add a section to your ASR template and include any input the client has benefited from, including both intangible and tangible aid. Here are a few suggestions.
Perhaps the major takeout from this paraplanner-specific take on the Consumer Duty is this: it not only matters WHAT you communicate to clients, it really matters HOW you communicate.
More than ever before, it is important to write with clarity, empathy and accountability.
Do this and you will go a long way towards helping your business meet the FCA’s 160-page call to action.