One in 10 advisers are looking to exit the industry because of the Consumer Duty as more than a third say regulations are harming their mental health, new research shows.
A CoreData study of 267 UK financial advisers conducted in August found more than one in 10 (11%) are considering leaving the industry or retiring because of the FCA's Consumer Duty. In addition, 35% think the new rules will see more advisers leave the sector than under the Retail Distribution Review (RDR).
Many advisers exited the industry in the run-up to the RDR, which came into effect at the end of 2012.
The study shows nearly a quarter (23%) of advisers think the Consumer Duty, which requires firms to deliver good outcomes for retail customers, will reshape the financial advice industry more than RDR. But almost half (46%) think the new regulation, which came into force on 31 July, is an unnecessary burden for advisers and will do more harm than good. Less than one in five (18%) disagree.
Furthermore, advisers point to the Consumer Duty (22%) and volatile markets (23%) as the biggest challenges facing their businesses over the next 12 months. Interest rates rises (17%), inflation (13%) and the cost-of-living crisis (8%) are seen as lesser challenges.
The cost of complying with the Consumer Duty is a key concern. More than seven in 10 (72%) advisers say the regulation will increase their business costs. And almost three in 10 (28%) say their firm has had to outsource parts of Consumer Duty regulatory compliance.
Amid expectations of higher business costs, advisers think the Consumer Duty will make advice more inaccessible. Six in 10 (60%) say the regulation will increase advice fees and widen the advice gap. And three-quarters (75%) think it will make it harder for their firm to serve lower value clients. More advisers focused on mass market clients think the Consumer Duty will expand the advice gap (64%) and render it more difficult to serve less wealthy clients (82%).
The research also shines light on how regulatory pressures are affecting advisers’ mental health and job performance. Nearly two-thirds (63%) say regulations are impacting their ability to do their job. And over a third (35%) say regulations are negatively impacting their mental health. This increases to more than half (52%) of mass affluent advisers.
“Our study shows the regulatory burden is exacting a heavy toll on both advice businesses and advisers’ mental health,” said Andrew Inwood, founder and principal of CoreData. “It is also concerning that advisers expect a regulatory-fuelled expansion of the advice gap. Rules should be geared towards making advice more, rather than less, accessible and helping advisers serve less wealthy clients.”
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