The Consumer Duty is set to come into force for new and existing products in July. Many firms will already be putting their customers first and be compliant with Consumer Duty but the cost-of-living crisis has underlined the importance to all firms of placing clients at the heart of their business agenda.
As Sheldon Mills, the FCA’s executive director of consumers and competition, explained: “The current economic climate means it’s more important than ever that consumers are able to make good financial decisions.”
To understand how firms will be able to demonstrate their adoption of new client-centric approaches, it’s worth reviewing the specific requirements the Consumer Duty requires:
• An end to what the FCA, in its more colourful moments, refers to as ‘rip-off charges and fees’. Clients need to know how much they have paid for advice.
• Make it as easy to switch or cancel products as it was to take them out in the first place
• Provide swift helpful and accessible customer support
• Provide timely and clear information that people can understand about products and services, rather than burying key information in lengthy terms and conditions
• Provide products and services that are right for customers
• Focus on the real and diverse needs of their customers
Given that advice firms are accountable to their clients for investment performance on an annual basis, many of these requirements should not require too much resource from compliant firms to implement. However, some changes in approach are needed.
Financial Planners have traditionally thought about regulation within the context of individual clients; after all, that’s who they have a fiduciary duty to serve.
But if firms focus on implementing the Consumer Duty on a client-by-client basis they will drown in a sea of paperwork. Instead, they should think of their business at a segment level, which is what the FCA requires.
• This column first appeared in Financial Planning Today magazine, Jan-Feb 2023 edition. Matthew’s column appears in each issue of the magazine. You can subscribe to the magazine by registering for this website and then checking subscription options in ‘My Account.’
Matthew Connell is director of policy and public affairs for the Personal Finance Society.
