It is also a difficult question to answer unless you consider tax and what expenses might need to be covered.
Consider, for example, that if all money for retirement is sitting in a pension, then more money will be required at the start compared with an Isa because of the taxation of pension withdrawals.
Taking this all into account, having a metric that shows the proportion of assets held compared with those needed to cover expenses with a good degree of certainty is a useful tool, and one that can be easily understood.
Colourful graphs showing a cash flow can be excellent for some clients, but not all will fully understand what they are looking at. Converting any planning into a simple output for those clients will be key.
Consumer support
Covering the client’s future objectives, imparting good understanding of the implications of the financial plan and allowing for risks in the future will all help to reduce the potential for complaints from clients.
Clearly, the advice firm will need to have the right processes to deal with complaints, but having a thorough planning process in place that covers all the potential risks should moderate the prevalence of complaints.
To sum up
Consumer duty has a wide range of implications across every area of financial services. Looking at financial planning specifically, doing your duty on an ongoing basis centres on continuing to provide professional advice to the high standards most firms already adhere to – but in particular making sure that the risk factors that could apply are taken into account, so that financial plans are robust and reflect the client’s objectives.
Avoiding obvious things that could go wrong is essential. As is building an evidence base of this good practice.
Overall, consumer duty-compliant advice will be anchored on doing the right thing by the client, for every client.
As these principles and rules should be common sense as part of providing a quality customer service in 2023 and beyond. Advisers need to assess whether sufficient factors are being taken into account in their current processes and ensure they continue to work in synergy with all the elements of the duty.
Andrew Storey is group innovation director at EV
