There has been some suggestion that Consumer Duty is too confusing and that this leaves advice firms in a tricky position when it comes to delivering on it.
For what it’s worth, I’m not of this opinion at all, and while, of course, it is a significant regulatory initiative which does require resource, understanding and change, it does seem fairly clear and not mind-blowing in what it demands – to relentlessly provide consumers with positive outcomes.
Where the ‘confusion’ may lie for some advisory firms, is that Consumer Duty is an example of principles-based regulation. The Financial Conduct Authority (FCA) is not prescribing what it requires of firms in minute detail, imposing processes which it wants following to the letter.
Instead of opting for a mandated or prescriptive approach, the regulator is instead asking firms to assess what they currently deliver, to look at what the FCA expects them to deliver, and make any necessary changes to ensure a new level of consumer protection and certainty.
And that can be troubling for some advisory firms, because there can be a natural tendency to play it safe when it comes to regulatory compliance. Prescription is often seen as the safest route for many, particularly smaller firms, who might wish for more clarity here and would ideally want the FCA to tell them exactly what to do, when to do it, and how to go about doing it.
I’m afraid that isn’t the case for Consumer Duty and that could be both a blessing and a curse, because leaving it open to interpretation comes with its own challenges, not least a fear that you’ve either done too little, or you’ve done the wrong thing, leaving you open to sanction someway down the line.
To ease some of these concerns, it’s important to look at Consumer Duty as a long-term focus.
The ultimate goal
Yes, it has required firms to have an overarching plan in place last autumn, and an implementation date at the end of July. However, as Robert Sinclair of the Association of Mortgage Intermediaries recently pointed out, not only is the mortgage market – initially at least – some way down the priority list for the FCA when it comes to determining what has been done, and how firms might have breached the new measures, but this is an ongoing process which won’t finish at the end of July.
However, that doesn’t mean you can simply neglect the requirements of the Consumer Duty because at some point, broker firms will be assessed, examples will be made, and you clearly don’t want it to be you.
For those smaller firms perhaps who are not part of a network, or are looking around for further support, the time is undoubtedly now to be seeking this.
There are just a few months left, and the last FCA review of what firms were doing on Consumer Duty preparations suggested too many appeared to be relying on ‘business as usual’ in order to ‘get them over the line’.
That isn’t likely to be enough, and reviews need to be undertaken, opportunities for improvement identified, and changes implemented. That all needs to be documented and you need to show how you are improving the consumer journey for your clients and the benefits this will deliver.
The start of the journey
And, just to reiterate, this is the start of the Consumer Duty ‘journey’ for all of us. The FCA is wholly committed to it, and this is likely to require more investment, resource and focus for all authorised firms in the months and years ahead.
Do not be afraid to seek support in order to achieve this, whether from your network or your third party compliance provider. There is a plethora of information and resource out there to help you with Consumer Duty, and while the clock is ticking, you still have time to get your house in order.
