The fact this has been launched during summer does give it something of an ethereal feel, probably because many people are still on holiday, and while, of course, it is a major shift, previously with most of the major regulatory developments, the industry has had a number of years to prepare.
Consumer Duty feels different, perhaps because the timetable has been much shorter.
However, here we are, and the first point to make – particularly for later life advisers but indeed all mortgage advisory practices – is that the Financial Conduct Authority (FCA) doesn’t necessarily have an expectation that you’ll be 100 per cent ‘perfect’ on Consumer Duty compliance from day one.
But, it most certainly does expect you to have been working on its introduction into your business, the changes it warrants – as we’ve said before, you can’t just blithely assume that you’re already complying with it – and the tangible updates you will have made as a result of that work.
Change for the greater good
Now, there has been a lot of disquiet around Consumer Duty, but in this case, I absolutely believe that it is, and will be, a force for good. Not least because it will ensure our sector focuses on positive consumer outcomes and it will shine a light on some very key areas for us, specifically how we deal with potentially vulnerable customers.
So, while we are in these early days of the new rules, it is important to keep looking at business practice, process, systems, customer communication, and everything around the advice process, with a Consumer Duty ‘hat’ on.
Again, while the Financial Conduct Authority (FCA) is unlikely to be bolting off from the blocks into your business, running through every aspect of your process with a fine-tooth comb in order to trip you up and make an example of you for the entire industry, there will be an expectation that should the regulator come calling or make a visit, that you’ll be able to provide your implementation plan, how you delivered on it and how you continue to do so.
Staying on top of the rules
For later life advisers, there are some specific actions that could and should be easy wins within the Consumer Duty structure.
One, as mentioned, is dealing with potential customer vulnerability – and while specialist advisers in the equity release space should be very experienced in this area, you can always improve.
I would certainly recommend looking at various Air resources, support, sessions from our Annual Conference which focus specifically on identifying vulnerability, how to approach it, how it should change the way you deal with these customers and their families, etc.
But, also in other key areas which are specific to later life advice and products, etc., one of those will be how you deal with the question of a customer making interest repayments on their product, or the ability they now have to make overpayments – that is capital lump sums – which are now an Equity Release Council requirement that has to be offered with all new lifetime mortgages.
As we know, one of the key issues that can be raised – particularly by family members later down the line – is around the roll-up of interest on products and how this erodes the equity in a property over time. There is a tendency for complaints to focus on this area, to suggest the client was completely unaware this would be the case when the product was taken out, and that the advice was not compliant as a result.
Heading off any potential complaint on this at the pass is vital, and so advisers need to document this conversation, and specifically any decision made by the customer that they are not able or do not want to service the interest or make a capital repayment, or indeed that they do not have the means to do so.
Covering old ground
For the vast majority of later life advisers, this will feel like a ‘grandma sucking eggs’ situation.
However, in my view, it is always worth reiterating the need for a full documentation of the entire process, especially in light of Consumer Duty, and because as we know, you should never assume this is clear on the client file if you haven’t been absolutely thorough.
These are just a couple of elements of how Consumer Duty shifts the dial for advisory firms, or in a way just solidifies the need for a proper process and how you set a clear outline of everything that has been done, said and agreed.
Continue to keep the duty at the forefront of your mind in everything you do, and I suspect both you, and your clients, will feel the benefits.
