The Financial Conduct Authority (FCA) is to introduce a new Consumer Duty, responding to concerns that financial services do not always work effectively for consumers. By introducing this new Consumer Duty, the FCA hopes to change the mindset of regulated firms fundamentally. In previous interventions, the FCA has witnessed practices by some financial services providers that cause consumer harm. These examples of poor practices include firms presenting information that exploits consumers’ behavioural biases, selling products or services that are not fit for purpose, or providing poor customer support.
In a new consultation, the FCA follows up on initial proposals published earlier this year and sets out more detailed proposals for new rules designed to tackle the causes of harmful practices.
What does this mean for financial services clients?
Once introduced, the new Consumer Duty rules should raise standards across the retail financial services sector by emphasising firms to get their products and services right the first time.
Financial services firms have to focus on supporting and empowering their customers to make good financial decisions, avoiding foreseeable harm at every stage of the customer journey. Providing consumers with information they can understand, offer products and services that are fit for purpose and provide helpful customer service.
The FCA will use assertive supervision and its new data-led approach to intervene quickly when it identifies practices that do not deliver for consumers. As well as publishing a consultation for the new Consumer Duty, the FCA has also shared draft guidance designed to help firms prepare for its introduction.
The consultation process runs until 15th February 2022, with the FCA expecting to confirm any final rules by the end of July 2022.
Sheldon Mills, Executive Director of Consumers and Competition at the FCA, said:
Making good financial decisions is vital to financial well-being and trust, but too often consumers are not given the information they need to make good decisions and are sold products or services that do not offer the benefits they might expect. We want to change that. We’ve been working to set a higher standard for firms, to put more of the onus on them to act in their customers’ interests and get their products and services right.
“The new duty will drive a change in culture at firms. We expect firms to step up and put consumers at the heart of what they do and we’ll be holding senior managers accountable if they do not. The duty will also help create an environment for healthy competition between firms, encouraging them to be innovative in developing products and services that meet consumer’s needs.
Here at Juniper we pride ourselves on putting our clients at the centre of all our work, ensuring that they are well informed and therefore feel empowered and equipped when making financial decisions.