Will new rules finally push financial firms to always put customers first?
Look at any industry and you’ll likely find some customers being treated unfairly, financial services sadly being no exception. The implications of the latter can be life changing. Whilst an unreliable washing machine or Internet provider might be an inconvenience, they are unlikely to impact your quality of life throughout retirement. But a financial adviser or investment company that treats you badly can do just that.
Aware of the industry’s poor reputation, the Financial Conduct Authority (FCA) introduced its ‘Treating Customers Fairly’ (TCF) mantra back in 2006. TCF focused on six outcomes for consumers (including clear communication, suitable advice/products and good service), all intended to ensure they receive a fair deal.
Whilst a worthy initiative that has made some difference, the FCA is not the best at policing such things and numerous examples of poor consumer treatment persist, not least some major mis-selling scandals in recent years (e.g., British Steel pension transfers and various mini-bond failures).
Aware it needs to up its game, the FCA is introducing new Consumer Duty rules, intending to deliver better outcomes for consumers. Details were published last month and are due to come into force 31 July 2023.
For firms like us who already treat their customers fairly, there will be little fundamental change. Our business has been built around always doing what’s right for our clients (commercial considerations come second), which is the outcome the Consumer Duty rules are seeking. That said, it will still involve a fair amount of self-analysis and paperwork, such is the nature of regulation.
Will these new rules work? It depends on how effectively the FCA enforces them. The FCA’s modus operandi has tended to be introduce rules, trust the industry to adhere to them, and leave the industry-funded Financial Ombudsman Service (FOS) and Financial Services Compensation Scheme (FSCS) to clear up the mess when it doesn’t. I am keeping my fingers firmly crossed the FCA turns a corner this time, finally leaving behind the less desirable aspects of our industry forever.
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