Industry welcomes consumer duty extension despite 'tight timelines'

At a press briefing yesterday (July 26), FCA executive director of consumers and competition Sheldon Mills said the onus will be on advisers to measure value for money when it comes to the new consumer duty

However, Tiller said “it is far too simplistic” to link value to the cheapest price, given that the consumer duty also focuses on the avoidance of foreseeable harm.

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“Customers will need to accurately understand the value of what they are paying for and the limitations that could reasonably cause foreseeable harm,” he said.

“The regulation is ambitious, far-reaching and the terms are broad, meaning it will be of consequence to all retail financial services. Firms will have to re-evaluate how they collect and collate data; implement a wave of new procedures and ensure culture is laser-focused on good customer outcomes.”

He explained that from the 12 principles of the new duty, the one which states ‘a firm must act to deliver good outcomes for customers’, is the most important.

“This really couldn’t be clearer - if you are serving customers, you must act to deliver good outcomes. No excuses, no passing of responsibilities. This is a regulation that will sort the wheat from the chaff.”

Meanwhile PA Consulting risk & regulation expert and former chief executive of the Financial Ombudsman Service Caroline Wayman, said today marks “a new era for financial services firms”, where better outcomes for customers and enhanced competition must now be at the top of the agenda. 

“After much consideration, the FCA has now passed the baton to financial services leaders, who must step forward and deliver for their customers,” she said. “Firms, and their boards, are now under time pressure to deliver robust plans and ensure their cultures and practices meet the new requirements. 

“With just three months for boards to sign off plans, and 12 months to implement this for most customers, firms will have their work cut out. With the cost of living crisis tightening its grip, we are likely to see the FCA use the duty to ensure firms are really delivering.” 

Quilter’s Tiller gave an example of what the regulator expects. He said it is foreseeable that a pension that is “insufficiently flexible” may not meet a customer’s future income needs. 

“The regulator’s view is clear – firms must ensure there is a reasonable relationship between the price a consumer pays for a product or service and the benefits they receive from it. Clear causal links must be made to the customer outcome, with measurable value assessments.”