One of the biggest challenges with consumer duty is that people may be viewing it as something specific to a point in time, according to Mandeep Bhandal, consumer duty lead at The Investment Association.
Speaking this morning (September 12) at 'Boring Money’s Consumer Duty – The Sequel' event, Bhandal explained consumer duty is a significant intervention that has created a new responsibility.
“It has also reinforced responsibilities for those who previously did have them, but framed them in a different way,” she said.
“So for our sector and the investment management sector, we have always played a primary duty and have always been delivering for our customers. That mission has always been at the heart of what we do in our business so consumer duty does really reinforce a lot of what we were doing.
“But the industry has engaged and taken this seriously and there's real innovation in the way we work to support the industry.”
Bhandal explained there's a lot of work still to be done with the implementation and there will be a period of continuous improvement but argued that firms have had to navigate an extremely complex set of requirements.
“Part of the difficulty lies in the fact that consumer duties lie across sector initiatives,” she said. “You're bringing up standards for whole of financial services but when you have critical points, like assessment of value - how then do you apply general requirements like that to different parts of activity across financial services?
“That has created some issues.”
She explained that there are a number of challenges to work through for industry members when it comes to the duty.
“Consumer duty is not a point in time of implementation,” she said. “This is about long term behaviour.
“Our industry is fully behind the spirit of the duty and implementing with that in mind and delivering for consumers.”
She argued that a key challenge over the next 12 months will be getting the data flow right.
“The IA has worked with other trade bodies to look at the data framework to ensure that the industry has a standardized data framework that is machine readable,” she added.
What the FCA wants to see
Elsewhere, on the panel was Chris Woolard, financial services regulation leader at EY and former board member and CEO of the FCA.
Discussing what the FCA wants to achieve with the consumer duty, he said the key thing is putting the customer at the heart of what it does.
“One of the things that it observes - certainly in my time - is you get serious breakdown and serious harm in the market often when part of the value chain - either vertically integrated or distributed across a number of players - impacts the end consumer at some point in their journey,” he said.
“So this was an attempt by the FCA to drive to the centre at every step of the design through to the sale of the product.
“It's also trying to do something to really reinforce at every level of the value chain, really trying to put it to the back, front and centre in business models in some cases.”
The consumer duty deadline was just over a month ago (July 31) and the panelists looked at how firms have performed.
From Woolard’s perspective, firms did understand that this was the FCA’s biggest change in regulation for about a decade.
“That message got through quite quickly, we saw people really take it seriously,” he said.
“Equally, I think once people began to think about the scale of change and what it meant, then there was the triage exercise.
“There has been lots of activity but still, an enormous amount to just make sure this is embedded,” he said.
In terms of fair value, Bhandal explained that there is a process point that might seem academic, but there is the assessment of value process.
“That is backward looking - it's used as a backward looking metric,” she said.
“So are charges justified, whereas consumer duty is a forward looking assessment, so is the price reasonable relative to the benefits and for recent foreseeable period, and that in itself has created complexity because you do have issues here where some parts of the market will be doing AOV, but there'll be some parts of the market who are obviously having a non AOV so fair value is quite subjective.”
sonia.rach@ft.com
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