'Doing the right thing by consumers shouldn't need legislation'

It should be obvious not to steal or murder and yet we need to make these things illegal in order to punish people for doing them.

It should be obvious to treat customers fairly, to not screw them on price, to perform service to the best possible level and treat clients with integrity, honesty, transparency and openness. 

The fact that we even need a consumer duty to make this a regulatory requirement to do the right thing proves that more people than we'd perhaps care to admit are doing the wrong thing. 

Few advisers would say that additional consumer protections are a bad thing, and most advice companies have already been exemplary in their commitment to high-class service to all their clients. 

Where does the duty veer from the realm of the trackable, traceable and quantifiable to the world of the subjective?

But making sure everyone is sticking to the rules - and that the rules themselves are reasonable and actionable - is something that parliamentarians are now trying to wrap their heads around. How will the FCA police this? How will it be able to quantify that objectives have been met?

And is this not just risking tying UK financial services in more red tape to keep up with ever-changing notions such as 'fair value'?

'Fair value' is where it becomes really sticky to prove there has been a failure to adhere to consumer duty.

The FCA, for the purposes of this outcome, has said 'fair value' is defined as:

(1) Value is the relationship between the amount paid by a retail customer for the product and the benefits they can reasonably expect to get from the product; and
(2) A product provides fair value where the amount paid for the product is reasonable relative to the benefits of the product.

It sounds reasonable enough, putting an onus on providers to make sure that products and prices are regularly and routinely updated to make sure they are fit for the consumers' purpose and still delivering fair value, such as insurance products at renewal.

But how can this be quantified in terms of advice as a service? Where does the duty veer from the realm of the trackable, traceable and quantifiable to the world of the subjective?

Does this all - as the City of London minister Andrew Griffith warned the other week - mean companies will continuously chasing their compliance tails? Will this open up UK financial services to waves of spurious law suits that will bog companies down in legal wrangling instead of developing and growing their professions?

It certainly means a professional body needs to step in and help financial services understand and comply with legislation such as consumer duty, while enabling its members to share best practice, grow their knowledge, work together to help clients and promote their profession.

Enter the Consumer Duty Alliance. 

Avengers Assemble: The people driving the new Consumer Duty Alliance

Keith Richards, Nick Cann, Ian McKenna, Johnny Timpson: if you were going to put together a crack team to create a professional body for financial services, these people would be among your top picks for the job.

Their combined experience, knowledge, reach and specialisms have been behind creation of the Consumer Duty Alliance, which FTAdviser revealed exclusively yesterday (March 9).

Unveiling the new professional body at the Shard, they did so while aware of the debates going on behind closed doors at the Treasury and during Wednesday's Treasury committee interrogation of FCA chief executive Nikhil Rathi, as to how the regulator intends to make sure that consumer duty regulations are obeyed and the effects of it quantified.

But those present at the unveiling of the CDA were assured this body was committed to making sure advisers and planners are equipped to thrive in the post-consumer duty world, and enabled to deliver a better service to clients. 

Can these big names make it work?

With all the wrangling in Westminster the past few days, and the 'known unknowns' of regulatory changes in UK financial services post-Brexit, will this new, independent, not-for-profit professional body be more than a well-intentioned venture that starts with a bang and goes out with a whimper?

Given the feeling of excitement and commitment from advisers in the room, and the obvious need recognised among advisers for a body that stands up for the profession and supports the professionals in it, I would say 'yes, it will work'. 

There is an advice gap and the FCA's imposition of simpler advice and guidance models alone cannot bridge it; the advice profession must work together.

There is also a trust gap, which the consumer duty will help to address.

If the new CDA can work towards providing the tools to enable the profession to embed these changes and succeed for themselves and their clients, all the better.

simoney.kyriakou@ft.com