The provider said it wanted to ensure advisers were compliant with the incoming regulations which come into effect on 31 July.
The explanations include:
- Ensuring the customer can access the widest possible selection of options
The Financial Conduct Authority (FCA) says firms should “communicate and engage with customers so that they can make effective, timely and properly informed decisions about financial products and services and can take responsibility for their actions and decisions.”
What this means: Advisers should ensure that customers have access to a wide range of products to meet their particular needs, using sourcing tools to stay updated on new offerings.
Where advisers may not provide guidance on a specific product type, for example protection insurance, but a need for such a product has been highlighted, it’s important that clients are signposted to someone who is able to provide support.
Another step is to be conscious of the support available to help with compliance. On 3 February, the FCA confirmed plans to support firms through the transition with a programme of engagement, which includes setting out in letters, the expectations of the Duty and arranging a series of regional in-person events for specific groups of small and medium-sized firms. Advisers should take advantage of these resources, as they could very well pay dividends in the long term.
- Pay attention to the nature and scale of characteristics of an individual’s vulnerability
The FCA said “firms must understand and take account of behavioural biases and the impact characteristics of vulnerability can have on consumer needs and decisions.”
What this means: In short, firms must accept heightened professional obligations towards customers in vulnerable circumstances; and the need for raised awareness, greater sensitivity, and additional technical competencies.
Internal training for both advisers and providers will remain a key facet of protecting the best interests of customers in vulnerable positions.
Once a vulnerability is identified, advisers can work with the client to decide on the financial decisions that best suit the individual’s needs and ensure that the client fully understands the ramifications of their choices.
- Monitor and regularly review the outcomes that customers are experiencing
The FCA says firms must “monitor and regularly review the outcomes that their customers are experiencing to ensure products and services are delivering outcomes consistent with the Duty” and “address any risks or issues identified and stop it occurring again in the future.”
What this means: Once a transaction has been completed, the relationship between the client and the adviser does not stop. Advisers should schedule regular check-ins with clients to ascertain whether the cover in place is still suitable and understand any concerns or issues clients may have faced since purchasing the product.
It’s also a good opportunity to understand whether a client is getting full value from their product offering, for example are they making use of value-added benefits included with a product that can provide additional support without having to make a claim?
From the provider’s perspective, it’s important to ensure that product development frameworks are fit for purpose and products are regularly reviewed to ensure they meet the needs of the intended target market.
This will include monitoring complaints and reasons for declined claims that may highlight whether a product is performing as intended. It’s also important to ensure necessary processes are in place to ensure steps can be taken to mitigate consumer risk.
The core guidelines
Socrates Mhlanga, chief risk officer at The Exeter, said: “The FCA has been unequivocal – the new Consumer Duty deadline is coming, and the sooner firms adapt to the regulations, the smoother the overall transition will be.
“Compliance is not a once and done either, it is a continual process. All protection firms, and advisers, must pay attention to these regulations, as the FCA will want to see concrete evidence that the appropriate operational changes have been actioned.”
Mhlanga said access to a wide product range, monitoring vulnerability and reviewing customer outcomes were the “three core guidelines”.
He added: “Protection and health providers and advisers that can not only meet – but clearly demonstrate that they have met – these core requirements will place themselves in the best position to grow and serve their clients in 2023, and beyond.”
