Nearly three months after the 31 July deadline, the Consumer Duty continues to make headlines. Industry commentators talk of ongoing ambiguity, and subsequent inconsistent implementation of the far-reaching regulation.
As that dust continues to settle all around financial services, Chris Jones, Dynamic Planner’s Proposition Director, joined a first Consumer Duty Champions Forum webinar to answer concerns.
What are common misconceptions clouding the Duty? What is the regulation’s essence? Post-July, what now for the Duty? How will it influence upcoming regulatory activity, like the review of retirement income advice?
Chris was joined by Michael Lawrence, Chair of the Consumer Duty Champions Forum. Over a dedicated 60 minutes, the duo poured their experience into unpicking the above, and more. The webinar was hosted by the Consumer Duty Alliance, formed this year in March, an independent body helping firms implement the Consumer Duty.
‘TCF by another name?’
Michael Lawrence: Chris, how would you respond if I said, ‘The Consumer Duty is just TCF [Treating Customers Fairly] by another name. I don’t need to do anything new’.
Chris Jones: Yes, go through the TCF outcomes and some of those are covered in the Consumer Duty, but they are things which fundamentally any business would want to do, whether it’s in financial services or another walk of life. Why wouldn’t you do those things? But when you say simply, ‘Consumer Duty is TCF by another name’ you’re disparaging both.
The regulator might have expected TCF to have been better implemented across financial services and perhaps if it had been implemented with more energy, then maybe the Consumer Duty might not have been required.
But, for me, the Consumer Duty was the FCA listening to what it was hearing and becoming properly client-focused, and indeed more adviser-focused and more closely linked to the real world. What’s really going on? And adding more help, rather than simply setting out outcomes, which firms had to work out how to implement. The Duty provides a lot more guidance about how you go about that.
‘Real desire to drive change’
Michael Lawrence: I think you’re right Chris. There have been a number of significant strategic interventions by the FCA in the retail investment market. Things like TCF, RDR and Product Governance under MiFID. I think all of that has been aiming to reach a point where firms are thinking carefully about their business model. Who is it right for? Who is it wrong for? Then undertake activity in a way which is consistent with client outcomes.
Boiling down the Duty to its essence: is your service right for your target market of customers? Are you charging a fair price? Help your customers make good investment decisions. And support them with ongoing advice. There’s not a lot to argue there, but that’s not to say that in complying with the Duty there isn’t complexity and challenges for firms.
I know, because I was working at the regulator until earlier in 2023, that there is a real desire through the Duty to drive positive change throughout financial services, but specifically within the consumer sector. I think what we will find is the regulator moving from looking at the Duty, in and of itself, to looking at other topics through the Duty’s lens. Like retirement income advice, which is a good example and ongoing.
‘A change in mindset’
Michael Lawrence: Moving on. Some firms think that now the July 2023 implementation deadline has passed, the job is done.
I’d personally be nervous of taking that view. And that is not to disparage the significant work firms have done, in the run-up to July, but we’re very much at the end of the beginning, in one sense, with the Duty. Now it’s about embedding changes which have been made into BAU.
Hopefully, people working in financial services, whatever their role, now know or are learning to know what the Duty means for their firm’s BAU. ‘Am I acting to deliver good consumer outcomes? Am I acting in good faith?’ I think that thinking will continue to evolve.
Chris Jones: The Consumer Duty is, if it was required, a change in mindset for your business – of being entirely consumer focused in every thing you do and every decision you make. That change in mindset is full of positives, for your business and for your working life. So I think if firms saw it as simply something they had to do by July 2023, they’re missing a huge opportunity.
Hear more. Watch the full 60-minute discussion with Chris Jones and Michael Lawrence, ‘Cutting through the Consumer Duty noise – What really matters?’