The Financial Conduct Authority’s Consumer Duty consultation has been met with calls for greater clarity and a longer implementation period for firms by the financial advice industry.
In response to the FCA’s consultation ‘A new Consumer Duty: feedback to CP21/13’, wealth management trade association PIMFA called on the FCA to give firms further time to understand and implement its Consumer Duty proposals.
While it welcomed the updated proposals, PIMFA believes there continues to be significant “scope for subjectivity”.
The watchdog has proposed an implementation period of nine months for firms to ensure the systems and processes they have in place are sufficient to measure consumer outcomes and provide the level of reporting required.
Liz Field, chief executive of PIMFA, said: “In our ongoing discussions with the FCA we have consistently asked for further clarity on the proposals they have put forward. To their credit, this updated package, in combination with the draft guidance produced, is clearer on the FCA’s expectations of firms.
“However, there is still scope for further clarity and we have asked for updated guidance on a number of issues as well as explicit statements of the expectations of firms. We do not believe a nine-month implementation period is sufficient for firms to ensure the systems and processes they have in place are sufficient.
“This is an industry which has undergone an enormous amount of regulatory change recently which, in combination with the ongoing impact of Covid-19, means resources are already stretched. We believe a two-year implementation period would be more suitable and are aware of other industries with even bigger implementation challenges who agree.”
Lisa Laybourn, head of technical policy and regulation at The Investing and Saving Alliance (TISA), commented: “We support the FCA’s ambition that the Consumer Duty will help make competition work more effectively, driving up quality and putting the consumer at the heart of their business. TISA is concerned, however, the changes required in practice are significant and through the consultation process are proposing timescales that it believes will enable a considered and effective implementation. The FCA will need to ensure that the cost of change for firms does not fall on the consumer, resulting in raising barriers to market entry or disproportionate costs on smaller firms.”
TISA also raised concerns around the clarity of the proposals, noting that concepts such as ‘reasonableness’, ‘good faith’ and legal terms including ‘cause’, ‘foreseeable’ and ‘outcomes’ needed to be clear, tight and transparent with a common understanding across the entire financial services industry.
Laybourn continued: “Where firms provide products which span across the remit of more than one regulator, such as the FCA and The Pensions Regulator, a joined-up approach or regulatory college is needed. This would help to ensure the same protection for consumers, irrespective of the regulator of the product. We are also concerned that without solving the advice-guidance boundary issues for firms, they will be limited in the contribution they can make in helping consumers achieve their financial aims.
“The introduction of the new Consumer Duty proposals could lead to conservatism among providers as they prioritise avoiding consumer harm over good outcomes, which could inadvertently create more financial exclusion. The new consumer duty is an opportunity to improve consumer outcomes but a number of concerns need to be addressed beforehand so we can achieve that worthy aim.”
