Ferguson: Platforms in for shock with consumer duty

Ferguson: Platforms in for shock with consumer duty
David Ferguson, CEO of Seccl and former Nucleus boss

Advised platforms are in for a rude awakening when the City watchdog starts implementing its new consumer duty, according to platform boss David Ferguson.

The new rules, to be implemented by April 2023, require businesses regulated by the Financial Conduct Authority to prioritise consumer outcomes, boost competition and ensure their products are fit for purpose.

But despite the various consultation papers and warnings issued to firms over the past year, some in the industry are not convinced businesses will be ready for it.

“Depending how forcibly the FCA manages consumer duty or enforces it, if it runs by the letter of what's being proposed there’s some enormous challenges for legacy providers to get their act together on pricing and service,” Ferguson told FTAdviser.

“I think there's a lot of activity and behaviour that goes on which is materially challenged by consumer duty. I think a lot of firms are not set up to be truly customer-led. There’s massive investments to be made which I don't think people have yet fully understood.”

Talking about the difficulties in switching many advisers still face, Ferguson added: “As normal members of society we’re entirely entitled to have our money managed where we want and this industry has done a pretty good job of making it difficult at times. Hopefully there’ll be a new dawn ahead of us, frankly.”

One reason why the Nucleus founder, who now runs Seccl, reckons platforms are not prepared is because of the state of their technology.

Some platforms have invested in changing their tech stacks and further digitising their services over the last year.

"Arguably, they [platforms] should have been telling people the last two or three years ‘by the way, we're not ready for your business because we're actually not very good at what we do’,” said Ferguson.

“I think that is actually how the obligations are changing. And if you know you've got such disastrously bad technology and you're going to have to spend enormous amounts of money to even get to a base level, that's not a really great place to start from - especially for an established business.”

Another reason why platforms are unprepared, according to Ferguson, is because they are still measuring their success by assets.

“I'm not sure the sector is, in aggregate, terribly self aware of how well it's doing other than how many assets it’s gathering and how many inflows it's getting,” he explained.

“If you start querying platforms on their net promoter score, rather than on their inflows every quarter, I think you'd probably get a different answer.