Earlier this year the FCA published a discussion paper on whether it should introduce a "duty of care" requirement that could place a general obligation on advisers to act in their clients' best interests.
But the Personal Investment Management & Financial Advice Association (Pimfa) has said the proposals are confusing and would represent a "one size fits all" approach
Responding to the FCA's proposals, Desmond Fitzgerald, a Pimfa senior policy adviser, highlighted the fact the paper included an annex detailing some of the numerous cases where the Treating Customers Fairly system was failing customers, but every example related to the banking sector.
He said: "The fact that the panel has identified concerns in the banking sector does not mean there should be 'one size fits all' approach to other sectors. Issues in one sector should not be assumed to apply to other sectors.
"Firms want to understand what the concerns are in respect of their activities. We would take the position that poor outcomes in the banking sector have not been due to insufficient awareness of duty of care obligations but rather structural design flaws within specific products and a lack of a sufficient proactive regulatory response when concerns were first raised."
He said that beyond being confused by the FCA's proposals, Pimfa also said practical concerns, including whether a "duty of care" would affect firms' ability to obtain professional indemnity insurance at an economic cost and whether more complaints would be found against firms by the Financial Ombudsman Service because of the additional obligation.
Mr Fitzgerald said: "A significant element of redress costs borne by industry firms arises from claims settled through the FSCS, which issues findings on a basis in law and if a new duty of care is implemented with legal status the paper does not address the potential consequences that could arise for the FSCS.
"Nor does it address the potential impact on firms' ability to obtain suitable professional indemnity cover."
The prospect of a "duty of care" was first raised by the FCA in 2016 when it published its mission document.
Since then, the FCA said the idea had received a mixed response from the financial services sector so the regulator decided to consult on the proposal to get a better idea of whether it should go ahead with it.
The FCA said it could introduce a duty of care by extending the client's best interests rule, which currently only covers non-regulated activity, to cover all regulated activities.
As an example of how this would work in practice, the FCA stated it could change its principles for businesses, so principle nine, which currently states a firm must take reasonable care to ensure the suitability of its advice for any customer who is entitled to rely upon its judgment, would require firms to act in the best interests of customers when providing advice.
The FCA has said the legal and medical professions already have similar duties, but it has stressed that any proposed solution must be suitable for the financial services sector.
damian.fantato@ft.com
