The cost of complying with new consumer duty regulations will ultimately fall to customers, experts have warned.
Speaking at the annual Defaqto finance industry conference today (September 7), industry specialists discussed what the Financial Conduct Authority (FCA) rules mean for firms and their clients.
It has been six weeks since consumer duty was rolled out by the regulator and sees stricter rules on customer satisfaction applied to the financial services industry.
Gary Storer, principal consultant at legal compliance company Konexo UK, told attendees that getting to grips with the “foreseeable harms” aspect of the duty will be the most challenging for the industry.
“One of the big things for senior managers is to get the organisation to think about foreseeable harms of where products could go wrong for particular target markets if they get the wrong advice," he said.
He explained that key to getting a handle on consumer duty was making sure the whole organisation understood the meaning of the foreseeable harms aspect of the regulation.
Storer said his organisation has been arranging mock interviews with senior managers of firms to prepare them for questions from the FCA, should the regulator come knocking.
On the question of whether the government would step in to help firms with additional the cost of complying with the regulations, the panel unanimously agreed it would be down to firms and ultimately their customers to pay for it.
Daniela Silcock, head of policy research at the Pensions Policy Institute (PPI), said the government “doesn’t appear to be keen on spending money” on the scheme.
Jeffrey Mushens, from industry body TISA, said: “Who pays? It is always the customers. The firms will pay the initial costs but this will eventually get passed onto the customers.”
Mushens added that the duty could result in poor advice firms being pushed out of the market.
He said: “Customers expect to pay for what they think is good advice. What I’m hoping is that the regulation will drive out bad value advice.”
However, Storer said in an ideal world the duty could bring down overall costs for firms.
He added: “Inevitably dialling up the standards will increase the costs but I also wonder whether it may dial down the cost of mediation and getting things wrong in the long run.”
tara.o'connor@ft.com
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