How best to sum up the Consumer Duty and the recently published rules that firms now have to integrate into their businesses?
In essence, perhaps we could call it the ‘walk a mile in another person’s shoes’ approach to financial services with all regulated firms having to effectively do that at every stage of the advice process.
There is already a growing amount of analysis into the Consumer Duty rules themselves, with Paradigm providing a considerable amount of support and resources in this area, that I hope advisory firms take note of and utilise. We have a Consumer Duty hub available at our website that will help set the scene and then some.
However, this is not an area where they can drag their feet, because there are some serious repercussions for all authorised firms as a result of these new rules, to such an extent that I’m not sure the regulator has taken its own advice when it comes to the timescale of implementation and what it now requires of authorised firms.
From the very first consultation paper, and the very limited time period the FCA was proposing for Consumer Duty adherence, a huge number of intermediary firms and providers, plus their respective trade bodies, lobbied hard for a much longer ‘prep’ time to be afforded to the industry.
Less than a year from that consultation paper was never going to be enough time, and while this was a message that appears to have got through, I’m not sure the FCA fully appreciate what firms are going to have to do, and the lack of time they have to do it, whilst also running their businesses.
The FCA might think it has given a fulsome extention by dint of it rejigging its implementation timetable from April next year to July, however there is a very strong argument to suggest that a three-month period of grace is not enough.
Plus, it has also given the industry a rather sharp sting in the tail – one that, as far as I’m aware, was never been part of the previous consultation, and seems to me to actually render that three-month ‘extension’ null and void.
Because, you could quite right argue, that the FCA has actually truncated the time period for firms to get their house in order, with the new requirement for all authorised firms to have their ‘implementation plans’ in place by October, which they will need to evidence their Consumer Duty plans can be delivered and they are robust enough to meet the rules.
The FCA can ask for that plan at any time after that month, and it will need to live up to some particularly high standards, even though – technically – firms will have another nine months to implement it.
At the time of writing, that gives firms circa-56 days to identify what they need to do, how they are going to do it, and write that plan which will satisfy the FCA. This, despite the October deadline not being something previously required or mandated.
We might justifiably argue therefore that the FCA is not ‘walking a mile in its regulated firm’s shoes’ here, especially given the wide and far-reaching requirements within the Consumer Duty rules.
This is a requirement that sits right across the supply chain, from manufacturers such as lenders and providers, to the sellers/advisers of those products whether they are DA or AR. It cuts beyond rule changes or mere guidance into the very heart of an authorised firm, into the underlying culture of a business, and for a large number of regulated entities it is going to require a considerable amount of work, resource and investment in order to meet the rules contained within.
This, at a time, when we are seeing increased regulatory scrutiny already in a large number of areas, for example, just after the Consumer Duty was published, the FCA confirmed its new rules to make authorised firms more responsible for their ARs, meaning more focus on systems, controls and resources they have and whether they are fit for purpose.
To say that the next year or so is going to present some significant regulatory challenges for advisory firms is a real understatement. It is going to need firms to take something of a major deep dive into everything to do with the customer journey, with firms in many cases expected to completely reassess what they have previously done, and whether it is fit for purpose.
If this seems daunting, then it is, and there is little time to get those houses in order. I suspect many firms will need (and want) outside expertise to help them through – this can’t be a tick-box exercise and you can’t simply copy what others are doing, because Consumer Duty rules and how you integrate them into your business will be unique to you.
Unashamedly I will say that Paradigm is here to help our member firms reach their Consumer Duty goals, and I will also say that if you are not a member but you require advice on both the requirements and the potential actions to take, then we are here for you. Each of our face-to-face events through the rest of the year will contain a session on the Consumer Duty and you can access these here.
However, don’t dither about making this decision – the clock for Consumer Duty has already begun and you need to start walking that walk immediately. October will be here before you know it.
Bob Hunt is chief executive of Paradigm Mortgage Services
