FCA’s new consumer duty will be 'dominant regulatory theme' in 2022

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FCA’s new consumer duty will be 'dominant regulatory theme' in 2022
Michele Golunska, chief executive at Sesame Bankhall Group

The Financial Conduct Authority’s new consumer duty will be the “dominant regulatory theme” for the coming year, according to Sesame Bankhall Group's chief executive.

Speaking to FTAdviser, Michele Golunska said the advice profession would have to decidate time during 2022 to understanding and adapting to the requirements of the consumer duty ahead of implementation in 2023.

She said: “By factoring these changes into business planning and seeking the assistance of support service providers such as Sesame Bankhall Group, who are championing the role and value of financial advice, firms will be able to ensure they continue to adapt to their clients’ changing needs and build sustainable businesses for the future.”

Golunska explained that through the new consumer duty, the FCA wanted to set a higher expectation for the standard of care that firms give.

She said the FCA believes this will require a significant shift in both culture and behaviour for many firms.

Golunska said the FCA will expect advice firms to:

  • Extend their focus beyond ensuring narrow compliance with specific rules, to also focus on delivering good outcomes for customers.
  • Consider the needs of their customers – including those in vulnerable circumstances – and how they behave, at every stage of the product/service lifecycle.
  • Learn from awareness of what their customers experience. On this point the FCA state that they expect firms to monitor, assess, understand and be able to evidence the outcomes their customers are receiving. In circumstances where firms identify customers who are not receiving good outcomes, the FCA would expect them to take appropriate action to rectify the causes.

Meanwhile, Golunska outlined other changes predicted for this year, stating that 2021 saw the industry adapt to the changes in people’s lifestyles. 

“The transformational impact of the pandemic has altered firms’ operational models, working arrangements and how they interact with their clients. This will continue in 2022, with further enhancements and efficiencies becoming part of our everyday business lives,” she said.

“Interest rate rises are likely in 2022 – albeit from record low levels – in a signal that the global economy is emerging from the pandemic. Whilst volatility can pose challenges, changes such as rising rates are an opportunity to review clients’ financial positions, presenting a reason for firms to engage and advise accordingly.”

Golunska said some of the “hot topics” for 2022 would include mortgage refinancing, as well as the value of protection and general insurance.

“Client engagement is a driving force in future planning,” she said. “This embraces the move towards greater relationship-focused business models, offering a more holistic, engaging and lifestyle-oriented customer experience. 

“This will see many firms looking to further integrate lending, insurance, valuation, conveyancing, tax-planning and even health and wellbeing propositions, to enhance their suite of services for clients - potentially partnering with other complementary service providers to expand their offerings.”

Linked to this is the technological revolution taking place, she explained, which will help to support these expanded propositions. 

“We’re all living more digitally-enriched lives, meaning that our technology expectations as customers are continually rising – and clients will expect the same level of digital capability, tools and services from their financial advisers.”

Golunska added that another important trend was the shift in focus from individual clients to a wider household or extended multi-generational family approach. 

“This trend will accelerate in 2022, enhanced further by the need to respond to the social and cultural shift that’s leading to the emergence of two powerful investor segments—women and millennials—who seek a different style of relationship with their adviser,” she said.

“Environmental, social and corporate governance will continue to be a hot topic. Societal awareness of this is increasing exponentially and it will play a greater part in the demands faced by the industry, which includes the rise of green mortgage solutions.”

Lessons of 2021

Discussing the past year, Golunska said advice firms, as well as the wider financial services industry demonstrated resilience as they adapted and adjusted through 2020 and 2021. 

“To their immense credit, advisory firms have embedded and embraced new ways of working, whilst continuing to look after their clients, their people and their businesses,” she said.

Markets have rebounded since spring 2020, providing investors with growth in most sectors, while the mortgage market has been buoyant, with many people opting to move or revamp their existing home in lieu of holidays or travel and taking advantage of the stamp duty relaxation, she explained.

“As Covid cases climbed so too did protection and insurance sales, with the pandemic serving as a reminder as to just how valuable these policies can be, along with the features and benefits they offer, such as health and wellbeing support,” she said.

“Similarly, the pandemic has seen people reassess their lifestyle choices and goals, and what’s truly important to them.”

Over the past year, Golunska said this change in outlook and expectations would have a long-term impact on how consumers engage with their finances and the advice community.

She explained that one of the biggest instances of this has been the increased awareness of ESG, stating that SBG has seen “widespread changes” to advice processes and product selection in many businesses throughout 2021, as firms respond to the increasing consumer demand for advice and solutions that consider ESG issues.

She added: “Not being customer-centric is one of the biggest threats to any business. In the relationship-driven world of advice, being engaged with its clients’ wants and requirements is paramount. 

“This means that finding and retaining the right employees to provide these value-added services has never been more challenging for advice firms – an issue that features as one of the greatest concerns in our conversations with business owners.” 

Golunska explained that as a result, employee engagement and wellbeing will continue to be a key focus for firms, as well as the need for businesses to be truly inclusive and help to nurture a more diverse financial services community.

“When you add in a range of additional concerns such as FSCS levy increases, vulnerable customers, financial advice consolidation and the move to hybrid working models then you have another significant year of change for the advice community to manage,” she added.

“The financial services industry has once again stepped-up to provide clients with the comfort and confidence that financial advice provides – a truly value-adding service that is more important than ever.”


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