Regulation/Consumer Duty
Hi all - how effectively do you think the FCA will regulate and enforce the Consumer Duty, and how long will it take for firms who are not adhering to the rules to be caught?
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Anything the size of Consumer Duty will be difficult to police, and in some respects some of the key objectives of CD will already be operational with the vast majority of brokers. We just need to consider some refinements to what we do, where we can improve communication, and keep educating clients effectively. Mystery shopping was always a favourite of the FCA many years ago, but I don't hear much of it these days.
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Initially, I believe they will find it almost impossible to police this because it's such a big policy change. However, in reality, if every adviser/lender had acted in the best interest of their clients in the first place, this change wouldn't be needed. For too long advisers have been 'selling' products that meet their needs and not those of the client, and lenders often fail to act responsibly and treat customers fairly. Take recent last-minute product withdrawals as a prime example of this. I always treat customers the way I would want someone to treat my children. When you act in such a manner, it's very hard to do things wrong. Unfortunately, not everyone acts the same way, and consumer duty won't change that I'm afraid.
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It's going to be difficult to enforce these regulations. The FCA has plenty of resource constraints such as staffing levels but also it's not clearcut what is a clear breach of the rules and what isn't. Detecting non-compliance will be difficult. I think there will be an informal grace period where the FCA learns and adapts. We will have a better picture next year.
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We have a professional and a moral responsibility to act in our clients' best interests. I am not sure that introducing new rules will encourage or discourage anyone from continuing to do so. There have always been and will always be unscrupulous advisers who seek to take advantage of others and unfortunately they will continue to get away with it.
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If every adviser did their job properly, this would not have been an issue and require a whole new rule. If you rush, cut corners and do not really care for your client, the FCA will step in and make it a hard rule. Advisers need to advise, not flog products that have the best commission or will come off the books very quickly. Treat others how you would want your old mum to be treated by another adviser. Simple.
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I would like to think that the FCA will make a real attempt to police Consumer Duty and hopefully by doing so they will be able to tackle firms who are not adhering to the rules. As with any big changes, I believe there needs to be a period of working together with firms to ensure that customers are receiving the right outcomes. Hopefully the FCA will regulate and enforce Consumer Duty from very early on as I believe that it can have a real positive benefit in the long term for customers and advisers. However, if firms are not complying with Consumer Duty after initial warnings, I would expect the FCA to enforce the rules with heavy punishments if required. I would expect to see enforcement being heavily policed within six months of the new rules coming into place.