How wealth managers should handle FCA’s new Consumer Duty

by | Apr 12, 2024

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Written by Rachael Rowe, RVP for Financial Services at Seismic

How wealth managers should handle FCA’s new Consumer Duty Rachael Rowe, RVP for Financial Services at Seismic In December, Britain’s Financial Conduct Authority (FCA) warned 42 investment companies to think twice about ‘double dipping’ (earning interest on client balances and charging fees for holding cash).

This shows how serious the FCA is about its new Consumer Duty regulations. As the July 31st deadline approaches, the pressure is on FS firms to meet all of their new client care, protection, and communication standards. 


These new regulations are forcing wealth managers to rethink their internal processes and how they deliver client experiences. 

Despite what some may think, it won’t be a quick fix. To offer the kind of ongoing value the FCA demands, financial services firms must creatively consider how to restructure their operations and draw on how other industries operate. 

To some, that may sound like a lot of extra work for nothing. But is it? 


What the Consumer Duty entails 

The FCA’s Consumer Duty is reshaping the financial services landscape. This new principle isn’t about ticking boxes or avoiding fines; it’s a fundamental shift in mindset. It’s a call for proactive design – products, services, and content crafted carefully with the target market’s needs at their core, ensuring fair value for every pound spent. 

For instance, the era of confusing jargon and impenetrable fine print is over. Clients must now receive clear communication that empowers them to make confident, informed decisions throughout their financial journey. And if help is needed, firms must provide the right kind of support at the right time. 


In addition, the Consumer Duty recognises that not all clients are the same. Firms need to take extra care of those in vulnerable circumstances, ensuring their needs are understood and met. 

At its heart, the Consumer Duty regulation is about a set of baseline expectations: acting in good faith, avoiding foreseeable harm, and actively helping clients understand and pursue their financial goals. It’s not a one-and-done exercise, either. The FCA demands an ongoing, iterative approach to achieving good consumer outcomes. 

What this means for wealth managers 


So, the Consumer Duty isn’t just a regulatory hurdle for wealth managers – it’s a catalyst for change. The old ways of opaque fees and a ‘set and forget’ mentality won’t work anymore. Instead, it’s time to rethink what it means to truly serve clients in the wealth management space. 

Wealth managers must now demonstrate, with clear data, that they’re always working towards their client’s financial goals. Product suitability is no longer a one-and-done assessment; it’s a continuous monitoring process to ensure investments remain perfectly aligned with a client’s evolving needs and risk profile. That means logging calls, meetings, and interactions and monitoring the effect of their products and content. 

It also means throwing out the jargon and empowering clients in understandable language. Proactive, tailored communication is the new baseline. This is an opportunity to build trust and break away from the image of the aloof advisor hidden behind complex terminology. 


Special emphasis must also be placed on identifying and understanding vulnerable clients. Wealth managers must now adapt their approach, providing additional support and thoroughly reassessing risk tolerance when necessary. 

In short, it’s a culture shift. But it’s not a prison sentence; it’s a chance to innovate. It’s an opportunity to discover added value, not just comply. Firms that genuinely prioritise client outcomes over internal sales targets will set themselves apart in this newly-focused marketplace. 

Yes, it will mean change, but these changes will also become differentiators for new clients and launchpads for improvement. For the firms that take it seriously, at least. 


How to solve it: enablement technology 

The truth is that the financial services industry is just catching up to what other industries, such as technology, telecommunications, healthcare, and life sciences have been doing for years with enablement tools. 

In those industries, modern companies haven’t viewed customer experience as as much of a hurdle. They’ve seen it as an opportunity to educate or upskill their staff and create superior client experiences. Instead of treating it as extra work, they use enablement tools to connect with a new generation, collect invaluable data, personalise interactions, deliver impactful meetings, and showcase their expertise. 


Compliance is an important part of it, sure, but it’s a byproduct. Not the focus. 

Instead, the focus is on AI-powered personalised training sessions to ensure employees are always up to speed and on message because it builds expertise and garners trust with clients; it’s on logging calls and meetings with AI, auto-generating notes, summaries, and content to prep, present, and follow up; and it’s on using AI to analyse vast quantities of content to determine its effectiveness so the company can focus the content on relevant audiences. 

While none of these examples focus on compliance, they all do relate to central parts of the FCA’s Consumer Duty regulations. 


While it is ultimately up to each firm to determine what data they collect and how they collect it to evidence customer outcomes, it will be difficult and complex to adhere to the regulations fully with existing technology capabilities. 


Business success in this digital society depends on seamlessly connecting data, technology, and people. The FCA recognises this, and the Consumer Duty regulations mark a seismic shift in financial services, aiming to create a fairer, more transparent industry that genuinely serves those who rely on it. 


For wealth managers who see this as an inconvenient burden, it promises a mountain of extra work. But for those who see the regulations as a positive, it’s a unique opportunity to copy how other industries are using enablement technology to improve their operations, create world-class client experiences, and ensure compliance.

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