The Financial Conduct Authority’s (FCA) Consumer Duty regulation comes into force today.
As FCA outlined earlier this year, It introduces a more outcomes-focused approach to consumer protection and sets higher expectations for the standard of care that firms give customers.
Consumer Duty introduces new rules and guidance to ensure that:
Products and services are designed to meet the needs, characteristics and objectives of consumers in a specified target market.
Products and services provide fair value with a reasonable relationship between the price consumers pay and the benefit they receive.
Firms communicate in a way that supports consumer understanding and equips consumers to make effective, timely and properly informed decisions.
Advisers provide support that meets consumers’ needs throughout the life of the product or service.
Commenting on the arrival of Consumer Duty, Morgan Ash managing director Andrew Gething says: “After much preparation and much talk, it’s fantastic to see Consumer Duty finally come into force.
“There’s no question it will be a transformative piece of regulation, helping level-up all areas of the industry to eliminate foreseeable harm and ensure good outcomes for customers – especially for those with vulnerable characteristics”.
“The FCA’s latest Financial Lives survey has demonstrated just how important this regulation is with 52% of UK adults (27.3m people) classed as financially vulnerable. Without a consistent approach to identify, monitor and evidence vulnerability, it will be impossible for firms to ensure they are delivering good outcomes or meeting the new rules”.
Gething insists complacency has long been a challenge for Consumer Duty, with firms believing they already meet its requirements.
“In reality, the new rules expand the scope of vulnerabilities firms must now consider and the actions they must take. It also expands the monitoring requirement considerably to cover the lifetime of the product”.
He adds: “Technology is proving essential in meeting its requirements, not just for a consistent and objective way to assess vulnerability, but to mitigate the considerable training overhead of learning all the necessary characteristics of vulnerability and the myriad of treatments available to clients.
“While there may be firms still with work to do and attitudes still to change, those that have embraced Consumer Duty are already understanding the competitive advantage it can provide.”
Finova national sales manager Natalie McNamara comments: “Today marks the deadline for firms to comply with the new Consumer Duty rules, with many intermediaries having already implemented a clear plan of action in advance, in order to meet the FCA’s new expectations.
McNamara suggests those who are still in the process of, or are yet to start, aligning their firm to these new rules should be looking to review all elements of their business where they can, and continue to embed these new practices to facilitate better customer outcomes.
“Leaning on technology is a great way to ensure follow-through for any new changes to brokers’ businesses. For example, by automating emails they can stay in touch with customers throughout the entire mortgage process, and by leaning on sourcing tools brokers can help clients access the right product to suit their financial needs, without taking up extra time”.
