How the consumer duty is affecting providers and advisers

This article is part of
Guide to the consumer duty

The financial advice industry is no stranger to regulatory change following the Retail Distribution Review, the contingent charging ban on defined benefit transfers, and upcoming changes to the appointed representatives regime to name a few.

Curran at Standard Life says the provider is still working through the finer detail of the regulator’s policy statement.

“[We] welcome the FCA’s decision to extend the timeline for implementation by 12 weeks for new and existing products, and a further 12 months for closed products,” he adds.

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“This provides vital headroom to enable organisations to translate the higher level rules and guidance into meaningful changes for customers and put in place support for advisers to help them navigate the changes.”

Many of the rules around designing and ensuring products remain fit for purpose are already embedded in product intervention and product governance (Prod) rules, says Vince Smith-Hughes, director of specialist business support at M&G Wealth.

Prod aims for products that meet the needs of at least one identifiable target market, are distributed appropriately and deliver appropriate client outcomes. “The consumer duty ‘products and services outcome’ builds on these,” says Smith-Hughes.

Aegon pensions director Steven Cameron likewise says the provider already has a process for approving new products and carrying out ongoing reviews of existing products as well as communications.

“We are, though, planning to fully review and align our existing processes to meet FCA expectations,” adds Cameron. “This will include an increased focus on testing customer understanding pre and post-launch of communications, so they remain not only compliant but support advisers when explaining material to their clients.”

While the new rules build on the FCA’s existing treating customers fairly rules and product governance requirements, David Tiller, commercial and propositions director at Quilter, says they set a higher bar in terms of evidencing good customer outcomes from products and services.

“The cross-cutting rule around foreseeable harm is particularly important, as it places the onus on providers to clearly explain their limitations as well as their value,” adds Tiller.

“The laser focus on outcomes means more opaque and speculative products will come under pressure, as evidencing the outcome meeting consumer expectation will become ever harder.”

Besides enhancing protections for consumers, Curran at Standard Life says guidance is an area where the provider believes an opportunity exists to do more to help consumers.

“We are in constructive discussions to examine the possibilities,” says Curran. “There are currently more than 13mn people in the UK in the 50 to 64 age group, and while some will seek regulated advice as they near retirement, this is unlikely to be the solution for everyone.

“We believe people deserve more support than currently appears possible through guidance, and that closing this gap is critical if we are to achieve good outcomes.”