The interpretation of the Consumer Duty is a tricky issue for both the FCA and the insurance industry. What is “fair” is ultimately an opinion, which needs to be broadly shared between consumers and those selling products. Long term, the big issue is trust, which is the cornerstone of insurance broking and financial advice; people expect advice on saving money on premiums, or investing money long term, that’s the reason for buying from an adviser – expertise has to mean something and if there are commissions paid then the amounts need to be set out at the start of the conversation.
So clarity on what is expected, on product wording and marketing langauge used, is going to be welcome. Expectations vs reality are often the main reason for threats of legal action further down the line. Here’s the word;
The Financial Conduct Authority (FCA) is today writing to a number of financial adviser firms requesting information about their delivery of ongoing services, for which their clients continue to be charged after advice has been given. In its survey, the FCA asks if firms have assessed their ongoing services in response to the introduction of the Consumer Duty, and whether they have made any changes as a result. It also asks for data on the number of clients due a review of the ongoing suitability of the advice as part of the service, how many received that review, and how many paid for ongoing advice but whose fee was refunded as the suitability review did not happen.
The FCA is collecting this information to assess what, if any, further regulatory work it may undertake in this area. The FCA anticipates providing a further update having considered the firms’ responses. Around 20 of the largest advice firms are receiving the survey so the widest possible understanding of market practice is achieved. Their selection is not based on any particular concerns with those firms.
The regulator had indicated it would undertake some cross-firm work in this area in a letter sent in December 2022. In this, the FCA set out its concerns that advice firms were not adequately considering the relevance, nature and costs of these ongoing services for all their clients.
A further letter sent in January 2023 explained how advice firms should approach the incoming Consumer Duty, reminding firms that it requires firms to act in good faith towards customers, avoid causing them foreseeable harm, and enable and support them to pursue their financial objectives. In a Consumer Duty webinar with firms in December 2023, the FCA flagged concerns that it appeared some consumers may be paying for a service, such as an annual review, but were not receiving it.
In 2021, the FCA published a strategy to support a thriving consumer investment market. The data gathering announced today on ongoing services forms part of that work to raise standards so people can invest with confidence. Central to that strategy is ensuring people can access advice if they want it and have trust in the services on offer.
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