Back in 2024, I wrote an article that urged advisers to find positives in the perceived pain of regulation. The potential implications of Consumer Duty were at the heart of my arguments.
Fast-forward to 2025, and we find the Financial Conduct Authority’s quest for “good outcomes” remains a major source of controversy in our industry. Frankly, it is very likely the biggest source of all.
Consumer Duty continues to dominate regulatory debate as its long-term effects become clearer.
Not for the first time in the history of regulatory supervision, unintended consequences are central to the disquiet. Like the Retail Distribution Review (RDR) before it, Consumer Duty has widened the advice gap.
With the benefit of hindsight, we can easily appreciate the logic of events. New administrative demands have exerted additional pressure on resources, as a result of which many adviser businesses have lost interest in looking after smaller clients.
According to a report published last December, satisfying the requirements of Consumer Duty has doubled the time taken to deal with some cases. The upshot, to put it bluntly, is that some clients – specifically, those with “lower asset values” – have been deemed more trouble than they are worth.
The evidence of this shift keeps mounting. Two thirds of firms surveyed for a study published in June said they had upped their thresholds for investable assets, with nearly half also confessing they had offboarded clients.
The widening advice gap reflects mounting resource pressure rather than a lack of intent.
It is worth remembering that the FCA itself warned that elements of this scenario could be in on the horizon. Published four years ago, a report on Consumer Duty’s likely economic impact cautioned: “It is almost inevitable that short-run costs for regulated firms will increase.”
It rather goes without saying that Consumer Duty might have been an altogether tougher sell if this prospect had been extrapolated into an unwelcome fall in client numbers. This is where we now stand.
So where are the positives? Before I offer a few thoughts on where Consumer Duty might lead from here, let me first quickly reiterate the more general point I made last year.
Regulation is routinely viewed as a form of interference. It is often derided as wholly unwarranted meddling. Yet the question we should ask ourselves – not least in an industry like ours – is what we might face in its absence.
Very simply put: we would be left with a free-for-all. We might even revert to the dark days of thousands of self-appointed “independent insurance brokers” whose commitment to good outcomes – to return to the FCA’s preferred term – was at best less than total and at worst non-existent.
Relatedly, regulation can lend itself to the survival of the fittest. For example, the RDR’s introduction of higher professional standards drove out many advisers who were averse to closer scrutiny and more exacting criteria.
Consumer Duty may well follow suit. After all, there is more than a suspicion that this initiative reflects a belief within the FCA’s corridors of power that too many clients are not receiving fair value.
Fair value does not require the same level of service for every client.
This brings us to the positives. Some advisers might be failing to provide fair value because they are not doing enough, but for others the problem could instead lie in doing too much.
I mentioned earlier the issue of resources. Ultimately, it is a lack of resources that is widening the advice gap. Consumer Duty has highlighted that many advisers are still employing a one-size-fits-all approach that is in neither their own best interests nor, crucially, their clients’.
The reality is that a service festooned with expensive and time-consuming extras makes little sense for many investors. By extension, it also makes little sense for many advisers.
Thanks to continued technological advances, it has never been easier to deliver lighter-touch levels of service. These can be priced accordingly, which helps clients, and can also ease the ever-growing burden on providers, which helps adviser businesses.
At Truly Independent, for instance, we have three propositions. The first is completely digital, the second is virtual, and the third is active – which is to say meetings are still conducted in person. This is how we aim to meet the needs of all our clients, irrespective of how wealthy they might be.
Of course, we have had to invest – not just in tech but in people. We have also chosen to be proactive, taking steps to shape our own destiny rather than merely waiting for edicts from on high and then complaining about what they entail when they at last arrive.
Looking ahead to 2026, innovation and segmentation will define sustainable advice models.
Taking all the above into account, it is right to say regulation involves pain. Consumer Duty offers no exception in this regard. Alas, that is the nature of the beast.
In the final reckoning, though, it remains up to us – as individuals, as businesses and as an industry – to see beyond the inherent challenges and understand how we can use enforced change to the advantage of all stakeholders over the longer term. In my view, we can do this only if we favour endeavour and innovation over apathy and inertia.
Katie Brinsden is Managing Director of Truly Independent.
