The consumer duty is here – all that remains is how we react to it

Karl Dines

Karl Dines

The incredulous look in the younger generation’s eyes was spectacular.

I am taking you back to a group workshop session I ran not too long ago, an eager cohort of young paraplanners are sitting in one corner of a U-shaped room, on a sunny day in Leicester.

I am talking the room through the pre-retail distribution review world, where manufacturers incentivised advisers to sell their products to clients, and all that entailed. This generation could not believe things worked that way; their mindset was completely different. Culturally different.

So, here is a question for the generation who worked through Financial Services Upgrade V2.00 (RDR). Looking back now, at the current state of our profession, what do you think? Was RDR a good thing? A dreadful thing? Better or worse?

My personal opinion is that we are in a better position now – better outcomes, a clear delineation on who pays for financial advice, and an elevated cultural change for the better. After all that angst, in some cases anger, the Redesign of Everything was worth it.  

Some would say we are at Financial Services Upgrade V3.00 (consumer duty). Principle 12 is with us and it is big, it is fast, it is enforceable.

The underlying ethos, I feel, is the change in culture the regulator would like to achieve. But it is not new – if you remember, TR 14/21 talked about ‘a culture of challenge’ when selecting platform providers.

And to be fair, it is a cultural shift that puts customers at the centre of everything our profession does; from the big guys such as product providers, to the not so big guys who advise clients who eventually become friends. What could possibly be wrong with that?

If you have yet to get to grips with Upgrade V3.00, here is the nutshell version, in summary:

So, what could possibly be wrong? I have had conversations with advisers along the lines of, 'Why should we be forced monitor this when we do it anyway, it’s just another admin burden',and there is frustration in that too. I get that, I really do.

I work with hundreds of advisers annually, so I see the complete spectrum of reactions. But I cannot help feeling that once we are a couple of years into this we will look back and we will see this as a good thing, just as we do now with RDR. There will be another spectacular set of incredulous eyes for me to write about.

There is a lot of between-the-lines stuff in this guidance, and it is maybe a new era, a new take on regulation. A number of things immediately jump out:

  • It is a cultural change.
  • This is outcome-based monitoring, at least annually.
  • The firm is in charge of how it is implemented. 
  • It requires the firm to document it.
  • It is enforceable.

What happens now comes down to how we manage it. Do we go kicking and screaming, or do we get on with the job? This reminds of Viktor Frankl’s book, Man’s Search for Meaning, and the following quote: