Before the Consumer Duty was put in place last July, I highlighted why it was worth adviser firms taking a step back from focusing on their obligatory implementation deadlines and considering the broader aspects of the rules.

One of these was why the FCA’s Consumer Duty is principles-based and why that matters.

It was a reminder to firms that, although the Consumer Duty requires some detailed work to deliver on its four outcomes, the rules are, at their core, about the industry doing the right thing.

Of course, most advisers are already doing the right thing. But the FCA has always made it clear that it introduced the Consumer Duty to drive a cultural shift across every industry sector to ensure the focus is on the consumer first.

That’s why the industry should never lose sight of the bigger picture.

Complying with the Consumer Duty is less about regulatory change and more about embedding the spirit of the rules into an organisation’s culture.

And any culture shift needs to be embedded in strategy.

If adviser firms use the start of a New Year as a time to plan for the 12 months ahead, then the Consumer Duty rules should be a core focus to ensure they continue to do the right thing for their clients.

And if the New Year period is not a time when firms look at their strategy, they should still use this time to review plans through the lens of the Consumer Duty.

The FCA is serious about raising industry standards

There’s one other good reason why adviser firms should take a step back now and consider the bigger picture.

The FCA introduced the Consumer Duty to raise standards right across the industry and can hold all sectors to these higher standards.

Over the past six months, since the rules were implemented, the regulator has identified areas of concern and has intervened, at a sector level in a series of clearly communicated guidelines, that doing the right thing for consumers really matters.

The FCA’s most recent ‘Dear CEO’ letter to wealth mangers demonstrates its intent to drive change with a shift in tone. The communication doesn’t change the fact that the majority of wealth managers are doing a good job for their clients, but it’s evidence of the regulator’s intent to take action where they find a firm is not meeting industry standards.

Doing the right thing for your clients

For adviser firms, embedding the Consumer Duty into their strategies shouldn’t be hard, given the entire purpose of the advice service is to help clients achieve their best outcomes. Looking at the big picture, therefore, and the overall aim of the Consumer Duty, can help them to reassess priorities in terms of what matters the most. This is important as they look to the future and embed the rules into their business’ culture.

With implementation deadlines behind them and taking stock at the start of a New Year, advisers should be considering the Consumer Duty more holistically, what it stands for, and asking themselves:

While the Consumer Duty’s four outcomes provide a useful framework for firms to kick the tyres on their service proposition and to identify the parts that deliver for clients at an individual level, taking a step back and asking the big picture questions should help them to identify what really matters and the potential areas of concern.

If there are potential areas of concern and a change in risk of foreseeable harm, it would be in the spirit of the Consumer Duty to prioritise addressing these issues first before getting back into the detail and areas of less risk.

Taking both a detailed approach to the Consumer Duty and a big picture approach is, for me, the most effective way for the industry to run efficient businesses and address the first principles of the Consumer Duty.

By regularly taking stock and looking ahead, the industry can consider the biggest risks to consumers and anticipate where the FCA will intervene to ensure good outcomes are being delivered. As an industry, we need to step away from the idea that meeting regulation is an exercise in compliance and form filling.

The industry needs to see the benefit of the Consumer Duty

How the industry reacted to the Covid-19 pandemic allowed the FCA to see that it could take a step back, reassess priorities and do the right thing. And its principles-based Consumer Duty is its way of ensuring the industry continues to do the right thing through taking less of a tick box approach and more of a strategic approach, embedded in firms’ cultures.

As we look forward to what 2024 brings, the industry and the regulator need to start seeing the benefit of the Consumer Duty and it should be central to advisers’ plans for the months ahead, as they take stock and focus on what really matters to do the right thing for their clients.

Visit our Consumer Duty hub to keep up to date with our insights and help with the rules. 

The value of investments can go down as well as up and your clients could get back less than they paid in.

The views expressed in this blog should not be regarded as financial advice.