How the consumer duty is affecting providers and advisers

“Firms will ultimately be empowered to define what they think a good outcome is, and then the onus is on them to show why and the steps they are taking to achieve this outcome. For firms, there is no correct answer and there is no defined pathway for them to follow.”

What are providers doing to meet the consumer duty?

What is expected of firms under the duty, the FCA says, will be interpreted in light of what is reasonable given the circumstances, including its role in the distribution chain.

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.

“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.”

The cross-cutting rule around foreseeable harm is particularly important, as it places the onus on providers.David Tiller, Quilter

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.

People deserve more support than currently appears possible through guidance.Andy Curran, Standard Life

“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.”