Consumer Duty – What does it mean for clients?

In the ever-changing world of Financial Regulation, the Consumer Duty is a new standard introduced by the Financial Conduct Authority (FCA). The new standard has been brought in to build upon existing regulations to ensure that financial firms are delivering on products and services they are providing to their clients.

The duty has outlined three rules, which the FCA wants firms to follow, to deliver good outcomes for clients:

• To act in good faith – to ensure decisions made are in a client’s best interest and work towards achieving their financial objectives.
• Avoid causing foreseeable harm – making sure products are suitable for the client in their design, structure and pricing. The intention is not for a firm to predict the future, that’s not reasonable, but any risks should be clearly outlined.
• Support and enable retail customers to pursue their financial objectives – Clients should be able to contact firms when they need to in an effective and understandable manner. Overall products should be designed for retail customers to reach their objectives and that products and services are readily accessible.

To coincide with the rules the following outcomes are expected to be achieved for clients:

• Products and services designed to meet the needs and objectives of its’ target audience. This should be assessed on an immediate and ongoing basis and relevant actions taken when identified that a product or service isn’t doing what it should.
• Price and value i.e., the price paid should be reasonable for the service that is being received.
• Consumer understanding in that customers should be provided information that they need at the right time and in an understandable format.
• Consumer support to ensure customers should be able to realise the benefits of the product and service they are receiving for their financial objectives to be met.

In summary the Consumer Duty aims to place a clear onus on firms to show that they are providing a service that matches the needs and objectives of the client. Firms must be able to clearly demonstrate that the service they provide is in line with the fees that a client pays and that they are ultimately providing value for money. No one can ensure that investments will always grow, that’s just not possible, but the intentions should be positive and clear. Clients should be kept well informed and have appropriate levels of communication available to them as per their individual needs.

The points raised in the Consumer Duty Regulation are important but hopefully nothing new to the service we already, and continually strive to, deliver to all clients new or old.

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