Fixed Fee Financial Planning and the FCA Consumer Duty

The FCA's Consumer Duty establishes a higher bar for financial advice firms, requiring them to deliver fair value, transparent services, and consistently good outcomes for consumers. Fixed fee financial planning is emerging as a model that perfectly aligns with these principles, offering a fair and predictable cost for financial advice that is independent of portfolio size or income.

What is Fixed Fee Financial Planning?

Fixed fee financial planning provides clients with a clear, up-front cost for financial advice and services, unrelated to the value of their assets under management. This contrasts with percentage-based fees, where costs are tied to portfolio size, often leading to higher charges for wealthier clients.

The fixed fee model brings key advantages, including greater transparency, predictable costs, and a stronger alignment of interests between adviser and client. Advisers are rewarded for the quality of their service, ensuring a focus on the client’s unique needs and goals.

How Fixed Fees align with the FCA's Consumer Duty

1. Fair Value: The Consumer Duty requires firms to ensure that products and services provide fair value. Fixed fee models naturally achieve this by offering a clear, consistent pricing structure that eliminates the disproportionately high fees often charged to wealthier clients under percentage-based arrangements. This is particularly attractive for high net worth individuals and families.

2. Transparency and Consumer Understanding: Fixed fee planning simplifies the often complex world of financial advice pricing. Clients are provided with upfront, easy-to-understand pricing, making it clear what they are paying for and why. This transparency improves consumer understanding, a key pillar of the Consumer Duty, while fostering trust in the adviser-client relationship.

3. Consumer Support and Personalisation: Advisers working on a fixed fee basis focus entirely on the client’s needs, offering tailored advice and ongoing support. Unlike percentage-based models, where advisers may have an incentive to prioritise to hoard client assets at the detriment of lifestyle, fixed fee structures ensure that this conflict isn’t present.

4. Avoiding Foreseeable Harm: The Consumer Duty also emphasises the need to mitigate foreseeable harm to consumers. By removing conflicts of interest associated with percentage-based fees, such as the potential prioritisation of investment growth over client-specific goals, fixed fee models ensure that advice is always aligned with the client’s best interests.

Why Consumers Benefit from Fixed Fee Planning

The fixed fee model offers several advantages for consumers:

• Predictability: Clients know exactly what they will pay, reducing financial uncertainty and making it easier to budget for advice.

• Inclusivity: Fixed fees open up access to professional financial planning for a broader audience, particularly those with smaller portfolios who may feel excluded by traditional percentage-based models.

• Trust and Confidence: Transparent pricing builds stronger relationships between advisers and clients, fostering trust and ensuring that clients fully understand the value of the advice they receive.

Conclusion

Fixed fee financial planning is more than just a pricing strategy - it represents a client-centric approach to financial advice that prioritises fairness, transparency, and personalised service. By adopting this model, financial planners not only meet the regulatory expectations set by the FCA Consumer Duty but also enhance trust, accessibility, and value for their clients.

As the industry continues to evolve under the influence of regulatory changes, fixed fee financial planning is likely to play a crucial role in shaping a more transparent and consumer-focused future for financial services and is why we embrace it across all areas of our business.

— Tom Roberts

Compliance & HR Director