Consumer Duty a ‘watershed moment’ that firms must take seriously, FCA warns at PIMFA conference

31 January 2023

Consumer Duty a ‘watershed moment’ that firms must take seriously, FCA warns at PIMFA conference

The Consumer Duty is a “watershed moment” for firms offering investment services and financial advice, that must be taken extremely seriously, Therese Chambers Director of Consumer Investments at the Financial Conduct Authority (FCA), told delegates at PIMFA’s Consumer Duty Conference today (31 January 2023).

“The Consumer Duty is a watershed moment and a key priority for the FCA, we are looking for a fundamental change in firms’ approaches to ensure the best client outcomes, not just technical compliance,” Ms Chambers said

Firms were warned they should not consider the Duty to be a “re-expression of Treating Customers Fairly (TCF)” and that they needed to recognise the purpose behind the Duty is to create a fundamental cultural change across firms that is led from the top and filters across the whole organisation.

“Ms Chambers told delegates that the “Consumer Duty is a substantial uplift in consumer standards and rules from July 2023. It will require firms to document and evidence consumer outcomes, which the FCA hopes will help firms review and make further improvements for their clients in the future”.

This meant the FCA was looking for a more substantive approach from firms as they evidence and document their work for consumers, the FCA Director said. “This is a step change and needs to be treated as such”.

Ms Chambers also added that the FCA had reviewed the implementation plans of several firms and suggested that some of those plans – particularly those of larger firms – were overly simplistic and optimistic about their ability to comply with the Consumer Duty by the deadline.

She said firms needed to ensure they were setting effective priorities and looking to reduce risk and assessing where they were likely to be furthest away from good consumer outcomes, so they can “focus on where the biggest gaps are and try to fix them first”.

Another area where firms also needed to pay more attention to was in their data strategies and the need for system changes. Ms Chambers said it had become clear from the FCA’s review of some firms’ implementation plans that they had not paid enough attention to the impact of third-party suppliers on consumer outcomes.

As she continued to outline areas of focus for firms ahead of the July 2023 deadline, she said that when reviewing firms initial plans, the Regulator had also seen evidence of generic approaches to pricing. She warned that firms needed to take a first principles approach to pricing and charges for products and services to ensure they were demonstrating fair value and that the FCA expected “to see changes in charging models as a result”.

When wrapping up her keynote speech she said that the FCA was taking the Consumer Duty “very seriously as a regulator,” adding that they are looking for “a fundamental change in behaviour” and for firms to continually review how to improve consumer outcomes in future as well.

“The Consumer Duty is central to the FCA’s own innovation and part of their strategy to rebuild consumer trust and confidence over the next three years,” she said. “We regard the Consumer Duty as the tool that will drive that change”.

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NOTES TO EDITORS

About PIMFA – the Personal Investment Management & Financial Advice Association

• PIMFA is the trade association for firms that provide wealth management, investment services and the investment and financial advice to everyone from individuals and families to charities, pension funds, trusts and companies.
• The sector currently looks after £1.65 trillion in private savings and investments and employs over 63,000 people.
• PIMFA represents both full and associate member firms. Full members provide a range of financial solutions including financial advice, portfolio management, as well as investment and execution services. They assist everyone from individuals and families to charities and pension funds, all the way to trusts and companies.  Associate members provide professional services to the PIMFA community.
• PIMFA leads the debate on policy and regulatory recommendations to ensure that the UK remains a global centre of excellence in the wealth management, investment advice and financial planning arena. Our mission is to create an optimal operating environment so that its member firms can focus on delivering the best service to clients, providing responsible stewardship for their long-term savings and investments.
• PIMFA was created in 2017 as the outcome of a merger between the Association of Professional Financial Advisers (APFA) and the Wealth Management Association (WMA) with a history as a trade association since 1991 – read more.
• Further information can be found at pimfa.co.uk

Contact

For further information on this release or other press matters please contact:

Matthew West, PIMFA PR Manager – MatthewW@pimfa.co.uk, +44 (0)20 7382 0376

Sheena Gillett, PIMFA Communications & PR Director – sheenag@pimfa.co.uk, +44 (0)20 7011 9869 / +44 (0)7979 493225