The Financial Conduct Authority (FCA) has made clear that it wants banks, insurers and wealth and asset managers to proactively question what they offer and how they offer it so that they know and can demonstrate that customers achieve good outcomes. Good outcomes will differ based on the product and services, the customer and their associated characteristics, and the firms’ role in relation to the product and service. Financial Services firms are required to act in good faith towards retail customers, avoid foreseeable harm to retail customers whilst enabling and supporting retail customers to pursue their financial objectives. If their products and services can’t be shown to deliver such outcomes for retail customers, then action must be taken to improve them. This is not just a theoretical change for customers or the FCA; the duty will be directly applicable for retail customers in many aspects of their financial lives, including everyday scenarios such as leasing a car, taking out a payment card with their favourite retail chain, or making online payments. This new principle is therefore intended to make a tangible difference for customers with regard to how firms provide them with financial services in their day to day lives.
The FCA is especially focussed on those areas where financial services firms are not helping customers to meet their financial objectives or where firms’ actions, or inaction, may lead to foreseeable harm. These objectives have been made clear through the specifics of the Consumer Duty rules and in public comments. The FCA have challenged firms to support customers through the current cost of living crisis and see it as the first test of whether firms are starting to meet the expectations of the Consumer Duty.
The FCA also recognises the large-scale impact the duty will have. In his speech to the Consumer Protection in Financial Services Summit, Sheldon Mills, the FCA’s executive director of consumers and competition, said, “Consumer Duty is a significant shift, both for firms and for the FCA.”1
Because of the scope, the FCA expects compliance to be an iterative process. During the EY Consumer Duty webinar, Mills confirmed that the FCA is seeking “substantive compliance” in time for the “day one” implementation deadline of July 2023. In other words, the FCA is taking a long-term view, and wants to see firms challenging themselves to continue to improve and deliver better outcomes for customers. Financial services organisations should recognise this change requires a shift in mindset, not just compliance by a particular date.