Pimfa warns 'woolly' consumer duty could lead to claims

Meanwhile, Jenny Stainsby, global head of financial services regulation at Herbert Smith Freehills, said: “The FCA hasn't taken on board concerns that a fair outcome isn't always a good outcome from a customer's perspective.

“There will continue to be situations in which a client is disappointed by the performance of an investment for instance, even where the firm has complied with both the letter and the spirit of the duty.”

She added: “'Good practices' do not always result in 'good outcomes' and it will be incumbent on the FCA and the Fos to distinguish between good outcomes and fair outcomes, regardless of the wording of the duty."

Complex or crystal clear?

The paper outlined that final rules are expected by July 2022, with an implementation period for firms running until April 2023.

However, Steven Cameron, pensions director at Aegon, said even if firms do, as the FCA believes, have sufficient detail of proposals to begin implementation now, this timescale was “particularly tight” bearing in mind the regulatory and legislative change. 

He said: “The FCA is pushing ahead with its new consumer duty, which it describes as a ‘reset’ and ‘fundamental shift in industry mindset’. The aim of making sure firms have good customer outcomes at the heart of all they do is admirable and the latest paper adds more detail to FCA expectations. 

“Running to 243 pages, half of which are taken up by draft non-handbook guidance, this illustrates just how complex and all-encompassing the new duty is.”

Cameron added it was “encouraging” to see the FCA had taken on board concerns that were raised. 

“For example, cross-cutting rules no longer include a requirement for firms to take ‘all reasonable steps’, something which looked highly subjective and challenging. Instead firms must act reasonably to avoid foreseeable harm and enable and support retail customers to pursue their financial objectives.

“We welcome the FCA’s intention to work closely with firms throughout the implementation period and to identify where further good and poor practice examples might supplement draft guidance.”

Elsewhere some industry body members have welcomed the FCA’s proposals.

Sian Fisher, chief executive officer of the Chartered Insurance Institute, said: “The FCA is being crystal clear: they want the profession to innovate to address the unmet needs of consumers. The regulator’s findings support those of our public trust index - failure to address this erodes consumer trust in the profession.

 “We fully support cultural change that enables consumers to make informed and timely decisions, receive satisfactory support from providers and take action to address their needs.”

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