Industry experts have largely welcomed the Financial Conduct Authority’s proposal for new consumer duty rules.
But concerns have been raised about whether the FCA's proposals take into account the existing rules on duties of care.
The FCA published its proposals this morning (May 14) outlining plans for a new consumer duty, designed to create a higher level of consumer protection in retail financial services.
Caroline Siarkiewicz, chief executive of the Money and Pensions Service said: "Financial services providers have a critical role to play in ensuring that their customers can truly make the most of their money and pensions, by developing accessible products and services that support good financial decisions and deliver strong financial outcomes.
"We therefore welcome this consultation on a potential new consumer duty to create greater protections for consumers and ensure that firms deliver the right outcomes for their customers."
Tim Fassam, director of government relations and policy at adviser trade body Pimfa said it was “vital” consumers were able to transact in the retail investment market with confidence.
He said: "We look forward to working closely with the regulator on these proposals but would urge caution against any unintended consequences which may emerge, specifically across the execution-only market which has proved to be such an effective tool in allowing retail consumers to transact and participate in a thriving consumer investment market."
However it has not been all good news for the regulator.
Matthew Rodhouse, director of finance at Helm Godfrey argued the consultation paper did not take into account the statutory duties already in place as duties of care.
He stated that for the new consumer duty to come into effect, the regulator needed to reconcile the rules with the “requirements of these existing statutory duties of care which seems unnecessary to me”.
“As I have said before, what is needed is robust guidance on what the existing statutory duties of care require. You do not need this new consumer duty.”
Meanwhile, Graham Bentley, managing director at Gbi2 explained it had been two years since the FCA published a discussion paper on the issue of a 'duty of care'.
He said while firms have the principle of “Treating Customers Fairly”, directors also have a fiduciary duty to their boards and companies.
“I think it’s pretty clear that financial services companies’ first consideration is to margin and profitability, but thereafter it’s generally about 'we're within the rules' rather than 'we’re doing the right thing'."
He noted that another key point is the “behaviour of ancillary companies”, who do not have a direct relationship with customers.
“Setting out a set of expectations of all companies’ behaviour towards customers, ie putting themselves in the customers position as a ’test’, provides the regulator with the means to enforce standards without the minutiae of detailed rules. This is especially relevant [for the] assessment of value reporting - price and value may now be more strictly regulated.