The road leading to the implementation of the Consumer Duty rules becomes ever shorter and, as I write this, we are four months until the day (31st July) when it is switched on and all authorised firms are supposed to be fully compliant.
Of course, one suspects the regulator is not going to jump up and down on firms who it deems not to be entirely complying in the immediate period post-31st July providing there are credible plans in place to address any outstanding nonmaterial issues. However, action will be taken, examples will be made, and therefore Consumer Duty should continue to be a major priority for all advisory firms over the next four months.
While there is no doubt that each sector has its challenges which firms are tackling, I think we can agree there is always room for improvement, and I would hope that no firm active in later life advice is resting on their laurels when it comes to Consumer Duty implementation.
As a recent FCA review of activity to date suggested, a number of authorised financial services firms think they can get away with simply suggesting their existing systems and processes are already compliant, and they need not attend to anything else.
I have news for those in such a position – they may not be, and they simply have to make improvements. It is certainly worth looking back at the FCA key findings from their work on later life lending focusing on lifetime mortgages to see where you might be falling short.
Are you asking sufficient questions around people’s repayment decisions – and documenting them? When you discuss why someone needs to access their housing equity are you not only ensuring their voice is captured but providing useful challenge to assumptions? How are you helping them to weigh up and discount all their potential options – including doing nothing?
While highlighted in the 2020, these questions – amongst others – are still a core part of providing the good customer outcomes that the FCA expects to see as part of consumer duty.
Communication is also vital and this legislation expects you to go beyond providing “clear, fair and not misleading” information to ensure people fully understand the choices they are making. With many firms’ websites their ‘shop window’ a little informal mystery shopping suggested that to achieve this improvement is needed.
Even something as simple as suggesting that they only advise on Equity Release Council-approved products before going on to say they also advised on all later life lending products. Firstly, the Council does not approve products but sets standards that they need to meet, and they do not cover all later life lending products so that is a statement that simply can’t be true.
It won’t take much to get this house in order but it is obvious that the Consumer Duty notion of transparency and clarity is simply not there for some firms at the moment.
When we’ve talked about Consumer Duty within our own business, I’ve charged our team to look at everything as if they were a consumer, starting off on the journey and walking through the entire process from beginning to end to see if it is as simple, easy to follow and transparent as we should all want it to be.
I would suggest advisory firms do the same thing. Be your firm’s mystery shopper from the starting point of using your website to find out initial information about the firm, all the way through until (hopefully) completion. I suspect it will be an eye-opener for you, because regardless of how you believe your firm appear to consumers, I guarantee you will be able to spot improvements all along the way.
Four months is not too long by anyone’s standards, and we’re all acutely aware of the importance being placed upon Consumer Duty by the regulator. Will you be first on its radar post-31st July? Probably not, but don’t think you’re never going to be under consideration. You can be sure you will be, and therefore now is the time to act and ensure your house is fully in order.
Stuart Wilson is chairman of Air Club
