However for advisers, given they hold the relationship with the end client, the greater proportion of the overall impact will fall on them.
Robert Vaudry, managing director of Copia Capital, says as a consequence it will be vital for advisers to select and partner with DFMs who are not only able to display their own compliance with the consumer duty, but can help advisers as required to ensure they are meeting the new standards, both at implementation and ongoing basis.
The consumer duty will be a set of principles, not rules, that require all firms in the value chain to evidence good customer outcomes and that they are acting in the best interests of the customer, not the firm.
Establishing clear reporting and access to data to help all parties to the client relationship meet these requirements will be important.
Morrow says that the consumer duty "sharpens the responsibility" on advisers to consider the nature of the outcomes that they deliver to their clients.
He adds: “Partnering with DFMs who have institutional standard investment management processes and controls is very likely to make delivery of consistent, cost-effective, risk-adjusted returns easier and more efficient than managing an in-house investment function, especially when clients become critical of investment performance and returns – a central issue in 2022.”
Hamm says advisers who outsource to DFMs are more likely to be closer to the FCA’s expectations in relation to the consumer duty already.
He says this is because DFMs seek to provide regular and accessible information on their portfolios; competition in the market has brought management fees down; and the focus on the total cost to a client is very quantifiable.
Tony Lawrence, senior investment manage at 7IM, says for DFMs there are extensive regulations in place that provide a solid foundation for acting with the best interests of the end client embedded into their proposition and business model, namely Prod and Mifid II rules.
Lawrence adds: “The consumer duty is the next step on this journey, but one that any DFM with a strong compliance culture and a client-first approach should be well-equipped to deliver.
"The adviser will need to partner with a DFM that they have confidence in to deliver on these commitments and satisfy themselves that they have appropriate reporting and oversight to ensure this continues into the future.
Ima Jackson-Obot is deputy features editor at FTAdviser
