New guidance from FCA for Financial Advisors - Consumer Duty

GazzaBloom

The FCA has introduced Consumer Duty for Financial Advisors:

https://www.fca.org.uk/firms/consumer-duty

I don't use a IFA but this video from Chris Bourne highlights the pros & cons for the Financial Advisor and the consumer and some of the pitfall the DIY investor can fall in to suggesting 90% of UK adults do not take financial advice...

https://youtu.be/EBmnXRKlzVc?si=4vWBbwiSXSd9VmLU

What's your thoughts?

dunstonh

The FCA has introduced Consumer Duty for Financial Advisors:

Not quite.   The FCA has introduced consumer duty for all regulated financial services.  It is arguable, that IFAs had the least changes.   FAs could have a bit more but its mainly the larger organisations that have seen the most.

Richard1212

The Duty specifies four outcome areas. All of these are highly relevant to the direct interactions that IFAs have with consumers – by phone, email and face-to-face. They have been introduced because of a lot of misleading IFA advisors, often with little or no training, and they are all aimed at tightening up IFA standards and improving customers' rights and expectations when dealing with IFAs. It is true that the Duty covers financial services ' businesses of all types, but it is most likely that IFAs ( being the least proficient and least organised in terms of size and staffing qualifications) will be impacted to a greater extent. And rightly so. An overdue move from the FCA.

Beddie

I see this as more costs for the industry, which are passed onto the consumer. This will result in even fewer people getting advice, due to high costs and IFAs seeking ever higher minimum sums. And all this for no real tangible benefit to the consumer.

gm0

FCA mission is impossible as framed.

Don't upset market (donors, scale of provision, worsening access to advice),

Be seen to try and improve consumer outcomes and address advice gap (somewhat achieved i.e the being seen to try part, albeit failed on actually improving outcomes and advice gap)

Avoid legal challenge action and associated bad publicity from outside government wherever possible.

Try not to mandate consumer participation due to blowback and lack of available provision in the market at scale - just a potential scandal.  Use compulsion occasionally as with DB transfer - but only shut the stable door after the horse has bolted.

So

Be seen to try (to justify headcount and business continuity of the agency)
Don't frighten the horses
Don't give politicians decisions to make that consumers or political party donors will truly hate
Muddle along in the detail.
Start preparing something bolder (advice gap) but shy away having wasted everyone's time

Just apply civil service 101 risk management via "process compliance" - list making and scoring as a substitute for hard decisions.  You have acted properly to clause X if you can show me piece of paper Y using terminology Z

Not a lot to see here. 

Automatic generation of a new version of compliance paperwork by provider IT once changed to do so and mapped to the clauses of underlying regulation, mapped in turn to the actual acts.

Does not a consumer outcome benefit make.  Just the latest version of pain in the !!!!!! compliance paperwork for providers to produce.

Wealth managers with exit charges or other consumer hostile features can either reprice.  Or come up with a compliance form of words that complies with the letter if not the intent - and essentially restore the status quo of can't take a joke should not have signed the contract.

Maybe it will do some marginal good.

This is not easy as they are constrained to use the legal basis they have to create (long) regulation levers and get it past the legal challenges of the regulated.