Get ready for the new Consumer Duty before it bites
The new Consumer Duty will be introduced in April 2023.
This significant “teeth sharpening” of the current regime means all practices will need to review how they provide service to their clients, including all the tools and information used to aid and make financial decisions.
On top of this, all businesses will need to collect appropriate data that proves they are complying with reporting obligations.
With a 12-month lead time, here’s how you can prepare.
Why is the Consumer Duty being introduced?
The Consumer Duty marks a shift from a rules-based regulatory approach to one based on outcomes.
The Financial Conduct Authority’s (FCA) aim is to “ensure a higher and more consistent standard of consumer protection for users of financial services,” and to prevent harm before it happens.
Sheldon Mills, executive director of consumers and competition at the FCA, told FTAdviser “that the new duty is needed because consumers are too often “not given the information they need to make good decisions and are sold products or services that do not offer the benefits they might expect”.
The 3 components of the new Consumer Duty
1. Consumer principle: A firm must act to deliver good outcomes for retail clients
2. Cross-cutting rules: Firms must take all reasonable steps to:
- Act in good faith toward retail clients
- Avoid foreseeable harm to retail customers
- Enable and support retail clients to pursue their financial objectives.
3. Four outcomes:
- Product design
- Customer service
- Price and value
How the AdviceBridge platform can save you time and stress in preparing for the transition
Because of the way that the platform works, using AdviceBridge helps you overcome some of the issues the FCA sees that cause consumer harm.
The information and reporting that AdviceBridge delivers means you no longer need to worry about providing information that is misleading or difficult for consumers to understand.
The clear language used in automatically generated reports and information won’t hinder clients’ ability to properly assess products or services that you recommend.
Input client data once and AdviceBridge runs over 1,000 simulations that take into account various tax scenarios and risk at wrapper level, recommending the best structure across your client’s holdings.
This robust analysis saves you time and ensures that you will not fall foul of recommending products or services that are not fit for purpose. AdviceBridge will ensure that recommendations deliver the benefits that consumers reasonably expect and are appropriate for the client’s needs.
Continuous use of the AdviceBridge platform across your client base helps you to record, monitor, test and (where necessary) adapt your business practices and processes on an ongoing basis. This allows you to ensure that you are satisfied that you’re delivering expected outcomes to your clients.
Finally, detailed management information captured and stored within the platform ensures your firm would be ready to provide information and data to the FCA. This robust easy-to-access data will allow you to easily evidence outcomes of your monitoring and testing activity.
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