Consumer duty  

Firms must get familiar with FCA's consumer duty changes

Firms must get familiar with FCA's consumer duty changes
Steven Cameron, pensions director at Aegon

Advisers must familiarise themselves with the Financial Conduct Authority's proposed clarifications to the new consumer duty rules, Aegon has warned.

In the FCA's quarterly consultation, chapter 8, the regulator has put forward some changes to the consumer duty rules to clarify the intention behind them. 

The consultation, which closes on January 9, contains what Steven Cameron, pensions director at Aegon, has called "very specific and detailed" clarificatory changes to the consumer duty rules, which were published last year in the FCA's FG22/5: Final non-Handbook Guidance for firms on the Consumer Duty.

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While Aegon will not be responding to the quarterly consultation - and "does not expect adviser firms to want to", Cameron said: "Advisers should familiarise themselves with the changes in case they affect them.

“Chapter 8 of the quarterly consultation proposes ‘clarificatory’ changes to new consumer duty rules to make sure they deliver as intended. These are very specific and detailed and primarily make sure the rules apply as we might have expected.

"The biggest surprise for me was the clarification that the new duty can apply if a regulated firm is providing services which can materially influence outcomes for defined benefit as well as defined contribution scheme beneficiaries."

He said this 'surprise' showed yet again just how wide reaching the new duty is.

Cameron added: “This is one example of further material to look out for. Another is the portfolio strategy letter for financial advisers and intermediaries.

"This made reference to the new duty in terms of the appropriateness, cost and fair value of ongoing services and also explained that the higher standards of care mean many firms will require a significant shift in culture and behaviour."

The other proposed changes in the latest quarterly consultation paper are: 

  • To firms approving or communicating financial promotions - clarifying which parts of the duty apply if a firm is carrying out no other regulated activity.
  • To firms in the temporary marketing permissions regime - extending the clarification on financial promotions to such firms 
  • The ‘closed product’ definition - to clarify that a closed product is one which is not being marketed or sold to new customers and for occupational schemes, which is not open to new members.
  • To non-retail financial instruments – to close a possible loophole which might have unintentionally exempted certain investment funds
  • Where an exemption applies in a sectoral sourcebook – to clarify how this works.

According to Cameron, this letter also promised a further letter specifically on the new duty ‘in the coming months’. He added: "I hope sooner rather than later".


As outlined by the FCA last year, financial services companies have until July 31 this year to implement the new consumer duty. 

The consumer duty will require firms to ask themselves what outcomes consumers should expect from their products and services, act to enable rather than hinder these outcomes and assess the effectiveness of their actions. 

It will include three key elements:

  • The consumer principle, which will reflect the overall standards of behaviour the FCA expects from firms. The wording being consulted on is: 'a firm must act in the best interests of retail clients' or 'a firm must act to deliver good outcomes for retail clients';
  • Cross-cutting rules which would require three key behaviours from firms: taking all reasonable steps to avoid foreseeable harm to customers, taking all reasonable steps to enable customers to pursue their financial objectives, and to act in good faith;
  • It will also be underpinned by a suite of rules and guidance that set more detailed expectations for firm conduct in relation to four specific outcomes – communications, products and services, customer service and price and value.

During FTAdviser's Financial Advice Forum last September, the FCA urged IFAs to take the consumer duty seriously, adding that it should be seen as a "significant regulatory initiative".

Director of consumer investments at the FCA, Therese Chambers, told delegates at the time: “The main thing we want you to have in mind in terms of the implementation of the duty is, please take this seriously.