"If you are serving customers, you must act to deliver good outcomes. No excuses, no passing of responsibilities. This is regulation that will sort the wheat from the chaff."
In its final rules, published today, the FCA confirmed that firms will have 12 months to implement the new rules for all new and existing products and services that are currently on sale. The rules will be extended to closed book products 12 months later, to give firms more time to bring these older products, that are no longer on sale, up to the new standards.
The Duty will now come into force from July 31st 2023, compared to an initial proposed date of April 30th.
The Duty will place the onus on firms to identify and manage vulnerable customers. The Duty not only requires organisations to take appropriate precautions to avoid unnecessary foreseeable harm, but also to provide objective and consistent evidence of their efforts.
Within this, the regulator says consumers should receive communications they can understand, products and services that meet their needs and offer fair value, and they get the customer support they need, when they need it.
The FCA says the rules will lead to a "major shift in financial services", setting higher and clearer standards of consumer protection across the industry.
Sheldon Mills, executive director of consumers and competition at the FCA, said: "The current economic climate means it’s more important than ever that consumers are able to make good financial decisions. The financial services industry needs to give people the support and information they need and put their customers first.
"The Consumer Duty will lead to a major shift in financial services and will promote competition and growth based on high standards. As the Duty raises the bar for the firms we regulate, it will prevent some harm from happening and will make it easier for us to act quickly and assertively when we spot new problems."
Simon Harrington, head of public affairs at PIMFA, commented: “The Consumer Duty has the potential to be a transformative piece of regulation which will, we hope, substantially improve how firms serve consumers and work towards ensuring they receive superior financial outcomes.
“But for that to be the case, as we have previously argued, firms need more time to implement the new regulations. We welcome the fact that the FCA has now recognised that such a transformative piece of regulation does indeed require additional time for firms to implement new systems and processes to comply with it.
“The decision to extend the implementation of the Consumer Duty to 12 months for new and existing policies, and then another 12 months for closed books, is broadly in keeping with our recommendations to the FCA. We are pleased the Regulator has listened to the industry and demonstrated a willingness to work with us to ensure this new regulation works well from the very beginning. Our focus now will be on supporting firms to implement the Duty.”
David Tiller, commercial and propositions director at Quilter, added: “As expected, the final rules for the new Consumer Duty have not changed significantly since the consultation paper. The one exception being a delay to timescales, which is entirely sensible to ensure the new Duty is implemented effectively.
“The regulation is ambitious, far-reaching and the terms are broad, meaning it will be of consequence to all retail financial services. Firms will have to re-evaluate how they collect and collate data; implement a wave of new procedures and ensure culture is laser-focused on good customer outcomes.
“In fact, the most impactful of the 12 Principles of the new Duty is the final one, which states ‘a firm must act to deliver good outcomes for customers’. This really couldn’t be clearer - if you are serving customers, you must act to deliver good outcomes. No excuses, no passing of responsibilities. This is regulation that will sort the wheat from the chaff.
“Firms will have to become more customer oriented before the point of sale as well as after. This will include clear segmentation of target markets to consider their characteristics and vulnerabilities – traits that advisers are well placed to identify. With the Consumer Duty, the future is no longer binary. It’s no longer just about what clients pay, it’s about the value provided and the impact this has on customers achieving their outcomes.
“This should be a cause for celebration rather than despair. More than ever before, there is an opportunity to demonstrate that advice is worth paying for. But we need to work things through carefully and logically to evidence and calibrate advice’s true value.”