Most well-run advice businesses – and indeed well-run businesses across financial services – will support the overarching aims behind the consumer duty and most already largely demonstrate the behaviours the regulator is seeking to encourage.
When you consider the investment platform market, for example, customers are able to switch providers as and when they choose, with healthy competition for business between a large and growing number of companies.
Any platform that fails to put themselves in customers’ shoes when designing products, customer journeys and ongoing communications risks seeing those customers walk out the door to a rival. In addition, they will almost certainly fail to grow by attracting new business.
Similarly, any company that does not consistently provide value for money risks being exposed via price comparisons offered by businesses such as the Lang Cat, Boring Money and Platforum, which are regularly reported in the mainstream trade and consumer financial press.
As such, there is more than sufficient competitive pressure in place to ensure good customer outcomes are at the forefront of everything investment platforms do.
If you think about the advice sector, failing to comply with the three proposed cross-cutting rules – acting in good faith, avoiding foreseeable harm and supporting clients to achieve their financial objectives – would likely see any business face a barrage of complaints. You could argue that is already the case under the current regulatory framework.
The role of the FCA
Given the new consumer duty is intended to replace existing FCA rules – most notably the treating customers fairly principle – it would have made sense to ditch this altogether to give businesses clarity about their responsibilities.
The decision to retain this principle in the rulebook alongside the new consumer duty risks causing confusing layering of regulation, which is far from ideal. If the FCA really wants to signal a step change away from the previous regulatory model, it should discontinue the old rules altogether.
It is indisputable that the onset of the consumer duty will require all businesses – even the ‘good guys’ – to review how they operate and potentially make changes. By the FCA’s own estimate, implementation costs could run as high as £2.4bn, representing a huge burden across various sectors.
It will therefore be vital the regulator recognises its own role in making the consumer duty work effectively.
Firstly, the volume of regulatory change in recent years has been extreme. For the cultural shift the FCA envisages to occur, the regulator needs to recognise that businesses have finite resources to deal with constant change and, where possible, give breathing space to implement the duty effectively.
