Consumer duty  

FCA to contact IFA bosses over consumer duty

FCA to contact IFA bosses over consumer duty

The Financial Conduct Authority said chief executives of advice firms should expect a letter from the watchdog "shortly" outlining what they should prioritise in the run up to the imminent consumer duty.

IFAs will soon receive a 'Dear CEO' letter from the regulator, according to the FCA’s department head for advisers, wealth and pensions, Nick McGruer.

The letter will cover four main areas - delivering good advice, reducing the number of scam victims, ensuring firms are paying redress and not phoenixing, and matching cost of advice with value for money.

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At the Lang Cat Home Game event in Edinburgh today (October 5), McGruer said: “We’ve recently considered some of the specific harms in the advice sector and will shortly be sending out one of our Dear CEO letters to the sector.

“This will set out the four outcomes we continue to see as priorities for the financial adviser portfolio.

“They are that consumers have received good advice which is suitable for their needs and objectives. That fewer consumers fall victim to pension and investment scams. In the last record statistics which are for 2020-21, we saw over half a billion [pounds] lost to investment fraud alone. We want to see that come down. 

“We want firms who are able to pay redress when things go wrong and fewer attempts at avoiding liabilities, including phoenixing. That links through to how we stabilise and reduce the FSCS [Financial Services Compensation Scheme] levy. 

“And the fourth one which arises from the consumer duty is that consumers receive appropriate services at a cost which is value for money.”

The FCA has told advice firms to ready their implementation plans for the consumer duty by the end of October, with a view to be compliant by mid-next year.

Asked by founder and former chief executive of Open Money, Anthony Morrow, how the FCA plans to enforce the consumer duty, McGruer said the regulator was working on its own implementation plan.

He said the FCA will be taking a sector-led approach to police and enforce the consumer duty. Already, McGruer said, the FCA is “thinking in the consumer duty mindset”.

He said the regulator recently took “swift action” against a firm over worries that consumers faced “foreseeable harm” in relation to a contractor the firm worked with.

The regulator has also started writing to firms with permissions to ask them if they are segmenting their target market, that they are charging costs which are fair, that they have protection in place against high-risk investment scams, and that they are not working with unregulated third parties, McGruer said.