The new year will see cost of living challenges “crystalise” and as a result advisers will need to ensure that the consumer duty is the “minimum standard” of client care, Johnny Timpson has said.
Timpson, financial inclusion commissioner and co founder of the Group for Autism Insurance Investment and Neurodiversity, told FTAdviser that 2023 will bring a hard reality for many in the UK as the impact of inflation and higher mortgage interest rates intersect with council tax increases and the end of energy bill support.
“The warnings by politicians of a tough year ahead are well founded as the Sunak and Hunt 2022 Spring and Autumn Statement changes kick in,” Timpson said.
Because of this, he has encouraged advisers to do all they can to anticipate and address customer needs, particularly when they are vulnerable.
First proposed in May 2021 by the Financial Conduct Authority, the consumer duty imposes new standards on financial advisers in a bid to create a higher level of consumer protection in retail financial services.
By the end of July 2023 all existing products and services will have to meet consumer duty standards, while the deadline for closed products and services is set for the following July in 2024.
Earlier this year, industry members raised concerns that there is a risk of complacency when it comes to the consumer duty, given some advisers’ views that nothing needs to change.
But in Timpson’s view, this is not the case.
Timpson said more work needs to be done to embrace and advocate for inclusive, diverse, equitable and intersectional conduct in the industry that “leaves no one behind”.
To achieve this, Timpson believes the industry will need to accept that it is not the regulator who is primarily responsible for protecting consumers from foreseeable harms, helping them make informed decisions and improving their understanding of financial products.
“This is down to us as practitioners, and as leaders, we are responsible and accountable for just this,” Timpson said.
A key element of the regulation will be ensuring the steps taken to support customers are well documented.
Katya Maclean, chief executive of protection challenger Guardian, told FTAdviser that this will involve greater emphasis on protection during the fact-find.
“2023 is the year of consumer duty implementation. On the provider side, I expect to see a move towards clearer literature and support.
"I also expect to see increased use of a menu-based approach where advisers pick-and-mix cover types to address client needs whilst maximising the effectiveness of their budgets,” Maclean told FTAdviser.
The chief executive agreed with Timpson that protection will become more important in the new year as the cost-of-living crisis continues.
“As savings shrink and life becomes more precarious, protection, including the still undersold income protection, should become an even higher priority for families and individuals across the UK, and I look forward to us as an industry rising to the challenge of providing that care,” Maclean said.