Since August 2023, companies in the financial sector have put customers’ needs first. At least in theory, following the introduction of new regulations as part of the Consumer Duty. However, the regulation has caused difficulties for the Financial Conduct Authority (FCA) and the regulated entities.
Now, the watchdog wants information from the largest service providers on how they have changed their ongoing services under the new regulations.
FCA Requests Information on Consumer Duty Compliance
The FCA has written to 20 of the largest financial advice firms in the UK requesting information on their delivery of ongoing services to clients. These are services that clients continue paying for after receiving initial advice.
The FCA survey asks whether firms have assessed these ongoing services in light of the new Consumer Duty rules that took effect on 31 July 2023. The Consumer Duty places higher expectations on firms to act in good faith, avoid foreseeable harm, and enable clients to pursue their financial objectives.
Specifically, the FCA wants to know if firms have changed ongoing services due to Consumer Duty. It also requests data on the number of clients due for a review on the ongoing suitability of advice, how many received that review, and how many paid for advice but did not receive the promised service and had their fees refunded.
“The FCA is collecting this information to assess what, if any, further regulatory work it may undertake in this area,” the regulator commented. It had previously raised concerns that some advice firms were not properly considering the relevance, nature and costs of ongoing services for all clients.
Consumer Duty
Firms were reminded in FCA letters last December and January that the Consumer Duty requires them to review the fair value of services provided regularly. The FCA said it appeared some consumers may be paying for services like an annual review but not receiving them.
A survey of over 1,000 regulated financial firms conducted before the new regulations came to light showed concerning results regarding overall industry preparedness. Only 61% of forex and CFDs brokers surveyed stated they would fully comply with the new rules by the deadline. An additional 30% of forex and CFDs brokers said they would only partially meet some requirements. Overall, one third of all survey participants across the financial services industry indicated they would not have everything in place to follow the regulations by the mandated timeline.
The data collection forms part of the FCA’s strategy to improve standards in the consumer investments market so that people can invest more confidently. The FCA said it would provide a further update once it had reviewed the responses from advice firms.
