The sector finally got to see the consumer duty proposals this week, the FCA’s big idea for replacing and beefing up TCF.
Money Marketing covers advisers’ reactions to the duty after seemingly overfocusing on other experts.
Very interesting from Informed Choice's Nick Bamford who has been quite cynical about the regulator in recent years.
He says: “The cynic in me thinks this is yet another regulatory initiative in an attempt to brush aside the heavy load of criticism that they have received for not doing their job well enough in previous years.
“But protecting the consumer from poor or corrupt practice is too important to allow my cynicism to get in the way.
“It’s all about the combination of suitability, transparency, risk management and clear communications and personally don’t know one financial planning firm that isn’t already going to heroic lengths to deliver on these points.”
As AJ Bell’s Tom Selby notes in his neat assessment also for Money Marketing, the Consumer Duty will, for all intents and purposes, replace FCA Principles 6 (the requirement to treat customers fairly) and 7 (the requirement to communicate in a way that is clear, fair and not misleading) with a new Principle 12. This runs as follows -
Principle 12 (‘the Consumer Principle’) requires firms to act to deliver ‘good outcomes’ for retail customers.
This new Principle will be governed by three ‘cross-cutting rules’ that state firms must:
act in good faith
avoid causing foreseeable harm
enable and support retail customers to pursue their financial objectives
In turn, the FCA says it wants to see ‘good outcomes’ in four broad areas:
Products and services
Price and value
The FCA's decision to extend the implementation period of its Consumer Duty followed concerns raised by industry respondents who claimed the original timetable was “highly challenging” and “overly short”. The industry is still grumbling about only getting nine months more.
Firms now need to apply the duty to new and existing products and services that are open to sale (or renewal) from 31 July 2023, with firms given longer, until 31 July 2024, to apply the duty to products and services held in closed books.
The requirements on closed offices are seen as one of the main benefits of the reforms for advisers as it may help them in their travails with closed platforms. The duty demands that agents of investors are treated in a similar way to investors themselves.
There is speculation in FTAdviser that the duty will spark test cases at FOS and it does hand considerable influence to FOS in determining fair value or not. It is one potentially significant downside for advisers.
In other news, HMRC has taken around £6bn in IHT receipts in the 2019-20 tax year with a rise of 14 per cent on the previous year. Commentators note the ongoing impact of the threshold freeze though, of course, that does not just attach to this tax of course.
The FCA has begun regulation of pre-paid funeral plans.