How will the new Consumer Duty affect clients?

May 15, 2023

For many of us, financial services represent a fairly opaque world where odd and esoteric terms often describe products and practices unavailable elsewhere. Such an unfamiliar environment leaves many a client feeling none the wiser and often vulnerable in such a market.

It is especially good news, therefore, that the Financial Conduct Authority (FCA) has promised the launch of a new Consumer Duty to improve the relationship between financial services providers and their customers. The emphasis will be on developing a customer-focused approach by financial services companies.

Customer focus

The new Consumer Duty envisaged by the FCA is designed to create a positive impact for clients by prioritising their interests in a way that delivers clear results meeting their reasonable expectations.

To achieve those results, financial services providers will be expected to produce clear and concise communication standards and to ensure that services and products meet the client’s needs. Under the new Duty, firms will be held directly accountable for their actions and communications with their clients.

Clearer, informed choices

The new Consumer Duty, in other words, is intended to dispel some of the mystique and confusion that too often surrounds the unfamiliar world of financial services.

The changes are aimed at increasing the clarity and transparency that consumers receive when they are dealing with financial services providers. That requires the provision of specific and explicit information about the costs of services and products, the fees consumers will pay, and a concerted effort in placing customer satisfaction at the top of the agenda so that consumer’s needs are met.

Checking back with the client

Another important function providers will be expected to perform is the regular review and monitoring of clients’ circumstances.

That checking back is designed to establish whether the services and products that the company continues to offer are still suitable for the client’s needs and circumstances.

The FCA as financial services regulator

The publication of a new Consumer Duty is seen by the FCA itself as part and parcel of the regulator’s self-transformation as a data-led but altogether more assertive and proactive organisation.

In a new environment that sees financial services providers closely and regularly assessing consumers’ needs, the FCA believes that it will be better placed to rapidly identify those behaviours by firms that do not result in the appropriate outcomes for clients. If such behaviours are identified, the FCA will be poised to step in to modify or constrain them straight away – before any such activity becomes entrenched.

A new-look FCA has in its sights on a role as a consumer champion, leading the way for a more customer-focused approach on the part of financial services providers so that clients’ needs and requirements are better met – and that consumers find renewed confidence, trust, and satisfaction with the financial services sector.

Outcomes

It remains to be seen, of course, how effective the new Consumer Duty initiative will be. But the FCA’s intentions are already expressed – the regulator wants clearer and more exacting standards across the industry so that consumer protection is to the fore and customers’ needs come first.