Consumer duty  

Consumer duty: Advisers must work to achieve client understanding

Consumer duty: Advisers must work to achieve client understanding

The Financial Conduct Authority’s former head of conduct specialists David Blunt has said advisers will need to work harder to ensure clients are not lost in terms and conditions from providers as a result of the consumer duty.

Some industry experts have argued the FCA's new consumer duty will see platforms being used to effectively act as regulators of advice firms.

However, speaking to FTAdviser, Blunt said the really important thing is for each person in the chain, whether its platform or adviser, to be clear with each other where their responsibilities begin and end. 

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“Very often problems arise because there's not that clarity so I think it's going to be crucially important for that conversation to take place,” he said. 

“It's important to look at the different outcomes and to think through who is actually responsible for which of these outcomes.”

He argued there is a “real challenge” for advisers because the consumer's understanding is largely going to be down to them.

“In many ways, the adviser might be receiving poor quality or unhelpful information, or information which is not in a form that is easy for a consumer to understand, and they've got a role to help the client understand what the key features are of the product,” he said. 

“I think the consequence of hundreds of pages of product description is that advisers will have to work even harder to deliver on the customer understanding part, and it may be challenging for advisers to say 'it's not my fault the customer didn't understand'.”

Inside the consumer duty

During his time at the FCA, Blunt led its priority of transforming culture across financial services. 

He is now senior adviser at Mazars in a consultancy role where he helps firms with their consumer duty.

Bunt said there are three areas that are challenging when it comes to the new regulations.

The first is that many advisers recognise there's a big data and management information (MI) challenge.

“They recognise things will need to be different because, for instance, we've got to do outcomes testing,” he said. “Well, what data do we gather from that outcome testing? 

“How does it meaningfully translate to MI which our senior decision makers can use? What goes up to the board?

“Some firms are thinking, ‘I've got a lot of MI, I've got a heck of a lot of data. I probably could use the data I've got more effectively, look at it in different ways, get other insights out of it. But there's also a chunk missing.'”

Blunt argued this is a big challenge for many firms, as building systems for smaller firms will be difficult.

The second area is culture, he explained, as he said the FCA has very much positioned this as ‘you've got to have a healthy culture if you're going to bring the duty to life successfully’.