Consumer Principle 12: The Consumer Duty
The UK Financial Conduct Authority has recently rolled out a new duty that “…sets higher and clearer standards of consumer protection across financial services, and requires firms to put their customer’ needs first.”
The principle requires firms to –
·????????Deliver good outcomes for retail customers.
·????????Act in good faith, avoid causing foreseeable harm, and enable and support customers to pursue their financial objectives.
·????????Ensure customers receive communications they can understand, products and services that meet their needs and offer fair value, and the support they need.
This duty comes into effect 31 July 2023 and significantly raises the bar. It is also reflective of the direction other countries are heading, especially Australia and New Zealand, and will demand a complete review and reset of financial advice models, including insurance.
Of particular note is the depth and breadth of this obligation and, as the WTW article draws out, how dynamic this obligation is, particularly in times of stress.
While financial institutions can still adopt standard advice models aimed at target customer segments, such generic approaches are likely only to be suitable as a starting point when it comes to individual customer engagement – and will need to be flexible enough to ensure advisers can readily adapt their advice (and the qualifications placed thereon) to fit customers point-in-time circumstances.
This will require yet another level of investment in training, procedures and resources to ensure we can deliver as expected – and we in Australia and New Zealand need to be anticipating and acting now (because something similar is already in hand).
For more from the FCA here’s a link https://www.fca.org.uk/firms/consumer-duty