We’re now over a month after the initial implementation plan deadline for the FCA’s Consumer Duty, from which point the regulator now expects to be able to see the aforementioned plan should they require it, and which firms should be working their way through in order to be ready for the ‘go live’ date of 31st July 2023.
That gives just eight months to be able to drive through the changes they feel are required, and judging by recent research from Air, the vast majority of firms are not opting for a status quo approach when it comes to the Consumer Duty.
Our research found that 86% of advisers are feeling the need to change the way they carry out business as a result of the Consumer Duty, and this feels like a very positive result given the education work many stakeholders have been undertaking in this area.
As a starting measure it suggests advisers/firms are genuinely reviewing the way they conduct themselves and they are seeking to implement the changes which will ensure they continue to provide the most positive outcomes for their later life lending clients.
In our space that means a number of areas should be under review, for example, reviewing the advice process in a general sense, but also looking at the charging structure operated, the nature of value, what it means and how advisers can demonstrate this, plus of course areas such as disclosure of the procuration fees/commission/marketing payments you might receive, and much more.
For the main part, the good news with Consumer Duty is that it is not ‘rocket science’ – much of its requirements will already be fulfilled by advisers/firms, but they do need to show their workings out to the FCA, and to show the journey they have been on with these new rules, from understanding them, to implementing them, the changes that have been made and why they will deliver for consumers in the way the regulator expects.
You have to be proactive with Consumer Duty. Which is why it was quite worrying to hear from our research that 5% of advisers confessed to not even knowing what Consumer Duty is. Now, even if your firm is all over the detail, this is not something that you can afford to ignore as an individual adviser – it immediately impacts on you and there are a whole host of responsibilities that come with it.
Similarly, I want to draw attention to those advisers within networks who might feel they can leave everything up to their Principal. I recently spoke to one equity release adviser, who is the only specialist within a network of 15 other IFAs, and who is passed the referrals of all those other advisers.
I asked him what he had done on Consumer Duty, and was amazed to hear he has done little, if anything. He hadn’t even heard from his Principal on this, and was simply assuming that everything was in hand. I quickly pointed out that such an approach was not going to work for him as the individual, and certainly wasn’t going to work for the network, particularly in a high-profile area such as later life lending.
In that sense, if you are within a network – and I know many later life lending advisers are – this is not something you can simply assume is being done for you. An organisation like Air can of course help, support and guide you in this area, but again all stakeholders are going to need to show their work in this area, what plan they are following, and how it will take them up to and beyond the end of next July.
There is more help from plenty of other sources and a treasure trove of information and guidance right across the financial services’ landscape if you look for it. Earlier this year the Financial Ombudsman Service (FOS) announced it would be publishing specific Consumer Duty case studies that could be used by businesses in order to help them implement the new rules and requirements. Make sure you avail yourself of these when they are published.
Consumer Duty is big news and a big deal in our world – my own opinion is that it is bigger than RDR ever was, and that it is the flagship initiative of the FCA for this period. It therefore is not a series of measures that can be implemented just by hoping you already have them in place. If you’re not already, it is time to take Consumer Duty seriously. The regulator certainly is.
Stuart Wilson is chair at Air Group
