Welcome to the second day of our week-long editorial series celebrating the anniversary of the Consumer Duty (CD). Yesterday we focused on what changes firms have had to incorporate into their processes from a regulatory and compliance perspective and you can find those insights here!
Each day this week we’ll continue to explore different facets of how Consumer Duty has reshaped compliance, business practices, and customer outcomes across financial services.
This anniversary marks a significant milestone, reflecting on the strides made by firms to prioritise consumer needs and deliver good outcomes. Our mini- series is covering the necessary changes in compliance, the role of technology in supporting CD, the importance of data and analytics, the impact on customer engagement, and the future outlook for Consumer Duty.
Day 2: What positive and negative impacts have you personally experienced in your business since CD was introduced?
Today, we delve into the regulation’s positive and negative (if there are any), impacts on the financial industry. Insights include enhanced alignment with regulatory demands, a sharper focus on customer needs, and the importance of advisers maintaining responsibility when outsourcing services. We also reflect on significant market changes and the mixed perceptions among advisers regarding the regulation’s effectiveness. This selection highlights the evolving landscape and its implications for delivering good consumer outcomes.
Chris Jones, Chief Product Officer at Dynamic Planner said: “There is no doubt that Consumer Duty has been good for Dynamic Planner because everything we offer is aligned to what it demands and so for us, it has all been positive. Generally, outside of Dynamic Planner, the most positive is the changes to the FCA themselves in their work, since Principle 12 has asked much more about the consumer and the advice and conduct that lead to the outcome rather than focusing on the product sold. With the advisers and firms that we work with there are some great examples of creativity and openness to change to deliver good consumer outcomes as well as a celebration and legitimisation of all the consumer focus work already being done which was almost a secret because it wasn’t part of a product sale.”
Legal & General’s retail division shares the following comments: “Building long-term relationships with our customers and supporting them through different phases of their lifetime is core to our purpose and our strategy. Putting the customer needs at the forefront of what we do isn’t new to Legal & General, and the introduction of the Consumer Duty has only served to sharpen that focus. The emphasis on outcomes, foreseeable harm and ensuring that our customers understand what we are telling them has led to a deeper understanding and ability to improve our customer offerings.
More specifically, our content creators have found it very helpful. There’s a need to share information with our customers in ways that they both understand and find practically helpful. That’s added even more force and focus to our already extensive efforts to make sure we’re sharing the right information in the right way at the right time.”
Nick Henshaw, Head of Intermediary Distribution at Wesleyan, said: “As we come to the end of the Consumer Duty implementation period, there are a couple of specific watch-outs for the advice industry we’ve come across during our conversations with intermediary customers.
If advisers outsource investment services, to Discretionary Fund Managers, for example, it is still their responsibility to provide suitable services. The regulatory buck always stops with the adviser.
Advisers should also consider whether the technology they use allows them to fully meet the unique and evolving needs of their clients. For example, their platform might not give them access to more specialist investment options, such as smoothed funds that are designed to mitigate sequencing risk and volatility risk during periods of economic uncertainty.”
Jamie Jenkins, Director of Policy at Royal London, said: “With the first anniversary of Consumer Duty approaching, it’s interesting to get a snapshot of the impact on adviser businesses and overall perception of whether it has been a success.
Generally, the change feels positive among most respondents though we can’t ignore the 23% of advisers who don’t think it has met its objectives. It’s a difficult one to speculate on, but we do know of adviser firms who felt they were already meeting the requirements so perhaps some don’t think the change in regulation is relevant to them.
The advisers we speak to are, overall, very supportive of the Consumer Duty and what the regulator is trying to achieve in delivering good outcomes for clients. And advisers are clearly very well placed to understand this better than anyone else in the value chain.
The Consumer Duty is arguably the most significant piece of regulation we have seen for nearly 20 years, seeking to make a cultural shift for the whole industry from simply treating customers fairly, to treating them well. It has undoubtedly led to changes in the market already, and if it hits its mark, it will significantly improve trust in financial services.”
What’s the consensus?
Today’s insights examine the regulation’s positive and negative impacts on the financial industry. On the positive side, companies have experienced enhanced alignment with regulatory demands and a sharper focus on customer needs. Many have noted the increased creativity and openness to change that has emerged to deliver good consumer outcomes. Firms are celebrating the emphasis on consumer focus, which was often overlooked in the past.
However, challenges remain. Advisers must maintain responsibility when outsourcing services, ensuring they provide suitable services regardless of external partnerships. There’s also the need for technology that meets clients’ evolving needs, especially in offering specialist investment options. Some advisers express scepticism, with 23% feeling the regulation hasn’t met its objectives. They argue that many were already adhering to similar standards, questioning the regulation’s relevance.
Overall, Consumer Duty aims to shift the industry’s culture from merely treating customers fairly to treating them well, which could significantly improve trust in financial services. Despite mixed perceptions, the regulation has undoubtedly influenced market changes and enhanced consumer-focused practices.
