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AJ Bell’s Selby comments on FCA plans for new ‘Consumer Duty’ in financial services

Tom Selby, senior analyst at AJ Bell
Tom Selby, head of retirement policy, AJ Bell
  • Financial services firms will need to ‘put themselves in consumers’ shoes’ under plans for a new ‘Consumer Duty’ published by the FCA this morning (A new Consumer Duty: Feedback to CP21/13 and further consultation (fca.org.uk))
  • New rules aim to ensure good customer outcomes in four key areas:
    • Governance of products and services
    • Price and value
    • Consumer understanding
    • Consumer support
  • FCA urged to apply extra consumer protection proportionately and avoid regulatory duplication

Tom Selby (pictured), head of retirement policy at AJ Bell, comments:

“Nobody could argue with the intent of these proposals, which is to ensure good outcomes are at the heart of everything financial services firms do. This applies across all facets of the value chain, from product design to marketing and communications.

“Most ‘good’ firms should already be operating in this way, delivering products that customers value and constantly driving to enhance customer service. Those who fail to deliver on either front will risk failing to attract new customers and existing customers simply walking out the door.

“The inconvenient truth is that the majority of ‘bad’ actors in financial services either flout existing rules entirely or take a slapdash approach to treating customers fairly.

“While the FCA is right to focus on boosting standards across the market, there also needs to be a credible enforcement threat against the minority of firms who consistently fail savers and investors. The regulator says it plans to be more assertive in dealing with firms who do the wrong thing – this will be crucial in delivering improved outcomes for consumers.”

Regulatory layering

“Given the new Consumer Duty is intended to replace existing FCA regulatory rules – most notably the ‘treating customers fairly’ principle – it would have made sense to ditch this altogether to give firms clarity about their responsibilities.

“The decision to retain this principle in the rulebook alongside the new Consumer Duty risks causing confusing layering of regulation which is far from ideal. If the FCA really wanted to signal a step change away from the previous regulatory model, why not discontinue the old rules altogether?”

Understanding consumer responsibility

“When the new rules come into force it will be critical to ensure consumers understand they retain ultimate responsibility for the financial decisions they make.

“A Consumer Duty focused on ensuring companies act in the overall best interests of customers will not prevent all harm and must not be used as a green light by claims management companies to chase spurious cases against firms.

“The Financial Ombudsman Service will have a central role to play here in ensuring the intent of the new Consumer Duty is mirrored in the way it is applied in reality.”

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