3 August 2022
By now, you are probably aware of the impending FCA legislation, Consumer Duty. If not, where have you been???
When the regulator announced it was going to prescribe the way firms should deliver good outcomes to retail clients, it seemed, at first glance, like a fairly straightforward statement. However, now we know more, we can see the new rules have the potential to affect nearly every facet of how you do business, including the profit you make and the liabilities you face.
The FCA has published its final guidance on the new Consumer Duty and whilst implementation has been delayed, there is an expectation that firms will have a detailed plan in place to ensure compliance sooner rather than later.
So, with this in mind, we’ve addressed the most common questions firms are asking us and outlined some of the steps you should be taking.
What is Consumer Duty?
A set of new rules is being introduced to raise standards of consumer protection and achieve better outcomes for clients within retail financial services markets. The FCA wants firms to:
- Equip consumers with the information to make effective decisions
- Ensure products and services give fair value
- Provide responsive and accessible consumer support
- Provide products and services that are fit for purpose
It is hoped this will ultimately drive a healthy and successful financial services system, in which you can thrive and consumers can make informed choices.
How does the new legislation affect me?
In short, if you are a regulated firm and you are involved in the manufacture or distribution of products or services to retail clients, even indirectly, the new rules will apply to you. However, the FCA has stressed they will be proportionate to the risk of harm you pose to consumers. For example, a firm offering complex or niche products will be required to have more detailed controls than one selling something simple and low-risk.
I already comply with TCF, does this mean I’m prepared for Consumer Duty?
Consumer Duty will overlap with existing Treating Customers Fairly principles, particularly six and seven, but will cover much more. Complying with TCF will not, therefore, mean that a firm is prepared for the new regulations.
What are the consumer outcomes?
The FCA has outlined four consumer outcomes, representing the key elements of your relationship with clients, how you design, sell and service products and contact points along the customer journey. They are:
- Products and services: The regulator wants all products and services for retail customers to be fit for purpose, designed to meet their needs and targeted appropriately.
- Price and value: Clients should be able to buy a product or service knowing that it offers fair value.
- Consumer understanding: Your communications must be able to support and enable clients to make informed decisions about financial products and services.
- Consumer support: You must be able to provide a level of support or customer service that meets clients’ needs throughout their relationship with your firm.
How long do I have to prepare?
Following the publication of the FCA’s Policy Statement, it has been confirmed that the Consumer Duty implementation date has been extended from April to July 2023 and Consumer Duty to closed book offerings will be introduced a year later.
Whilst these dates seem a long way off, the regulator expects firms to have plans in place by October this year.
What should my plan look like?
There is no ‘one size fits all’ approach. The plan you build will depend on your firm, its size and the role you play within the distribution of products and services.
We are happy to help you develop Consumer Duty plans and prepare for the new regulations. For more information, or advice about improving your compliance procedures, contact us on (0161) 521 8641 or email: [email protected]