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“Best interest” vs “Good outcome” for consumers? CISI members give their verdict in FCA Consumer Duty response

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The majority of CISI wealth managers and financial planners have agreed they would prefer to see the words “best interest” rather than “good outcome” in the FCA drafting of the Consumer Principle for their latest consultation paper.

The not-for-profit, professional body surveyed 2,596 of its members as part of its official response to the FCA Consumer Duty consultation paper.

The FCA question: What are your views on the options proposed for the drafting of the Consumer Principle? Do you consider there are alternative formulations that would better reflect the strong proactive focus on consumer interests and consumer outcomes we want to achieve? was asked of CISI members.

For Option 1: “A firm must act to deliver good outcomes for retail clients”, the CISI received 566 votes. For Option 2: “A firm must act in the best interests of retail clients” 2030 votes were received.

In its response to the FCA consultation paper, the CISI said: “‘Best interest’ aligns with the CISI Code of Conduct which states: Client Focus – To put the interests of clients and customers first by treating them fairly, being a good steward of their interests, never seeking personal advantage from confidential information received and utilising client data only for a defined purpose.

Simon Culhane, Chartered FCSI, CISI CEO said: “These proposals are ultimately about developing a trusted and competitive financial services profession for consumers. When responding to this FCA Consumer Duty consultation we have been struck by how much of this is already embedded in our member Code of Conduct, relating to customer interest and personal and professional standards and behaviour. We look forward to seeing the final FCA proposals.”

Other key issues included in CISI’s response to the FCA Consumer Duty paper:

  • That “consumer harms” includes misleading information or information that is either too complex or has taken too long to collate, which prevents the client from making a timely effective decision.
  • Suppliers and providers not making information accessible which impacts the client, such as clear dialogue and comparisons on fund performance and fee structures in order to make the price and value clear so the client can make decisions about using an advisor.
  • Client aspirations and ensuring that long-terms goals and short-term needs can be met are vital and the cross-cutting rules seek to address this important issue.  The four outcomes, Communications, Products and Service, Customer Service, Price and Value are in many ways all essential elements of the firm-client relationship.  In particular, the relationship between these outcomes being positive and the clients’ financial wellbeing highlight the importance of these outcomes.  Expectations of firms do need to be clear however this should not be interpreted as a minimum standard for firms to achieve and the FCA should encourage and expect firms to do more than the minimum in these key areas.
  • It is our view that there is potential for the exclusion of vulnerable customers to arise as an unintended consequence of the proposals. If firms believe that the requirement to demonstrate that products are specifically designed to meet the needs of vulnerable customers is onerous, are overly costly, or that there are additional or disproportionate risks to including vulnerable customers within their target market, then this could result in their unintended exclusion.
  • The CISI supports any guidance given or requirement of firms to be as transparent as possible and to communicate in a clear and concise way, in the most appropriate timeframe.
  • There is a risk that imposing on financial services firms a formal Duty of Care might lead to smaller firms struggling to comply or investing large amounts of money to ensure compliance.

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