FCA unveils final Consumer Duty Rules

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Graham Finlay
Graham Finlay

Graham works within the Strategic & Technical team at Columbia Threadneedle Investments. Graham has undertaken a variety of adviser focused roles since 2003. Over the last few years he has been responsible for developing and delivering presentations at seminars across the UK on a broad range of investment and financial planning related topics. Graham holds a number of industry qualifications, including the CFA Certificate in ESG Investing, Investment Management Certificate (IMC), Diploma in Investment Management (ESG) and has more than 20 years’ industry experience. Graham previously worked with both Edinburgh Fund Managers and Scottish Widows.

Strategic and Technical Sales Manager

28 July 2022

FCA unveils final Consumer Duty Rules

The Consumer Duty rules come into effect on 31 July 2023 for both new and existing products and services on sale.
Consumer Duty includes a new Consumer Principle that requires firms “to act to deliver good outcomes for retail customers” and rules providing greater clarity on the regulator’s expectations under the new principle.
The FCA said: “Firms have to consider the needs, characteristics and objectives of their customers, including those in vulnerable circumstances, and how they behave, at every stage and in each interaction. They will also need to understand and evidence whether those outcomes are being met to deliver good customer outcomes.”
The new Consumer Duty will have a significant impact for financial services and I believe represents the largest fundamental change to the financial advice industry in the UK since the Retail Distribution Review (RDR). The new Consumer Duty represents a cultural shift in regulation from treating customers fairly to positioning customers to achieve good outcomes – then proving it. Regardless of the shape or size of firm, the Consumer Duty represents a huge undertaking to make sure firms can evidence their customers and clients are at the heart of their business.
Here is a quicky summary of new rules:
  1. New Consumer Principle that requires firms to ‘act to deliver good outcomes for retail customers’.
  1. Cross-cutting rules providing greater clarity on the FCA’s expectations under the new Principle, helping firms interpret the four outcomes.The cross-cutting rules require firms to:
  • act in good faith
  • avoid causing foreseeable harm
  • enable and support retail customers to pursue their financial objectives
  1. Rules relating to four outcomes that the FCA want to see under the Duty. These represent key elements of the firm-consumer relationship which are instrumental in helping to drive good outcomes for customers. These outcomes relate to:
  • products and services
  • price and value
  • consumer understanding
  • consumer support

For more information

26 April 2021

EU adopt MIFID II regulation requiring that client’s ‘sustainability preferences’ be taken into account

On 21 April the EU confirmed the introduction of ‘sustainability preferences’ under MIFID II, as a top up to the suitability assessment.

This means that EU investment advisers (financial advisers advising on investments) will be required to obtain information not only about the client’s investment knowledge and experience, ability to bear losses and risk tolerance as part of the suitability assessment, but also about their sustainability preferences. This will ensure that sustainability considerations are taken into account on a systematic basis when advisers assess the range of financial products in their recommendations to clients.

HM Treasury and the FCA, due to the UK leaving the EU, will not be automatically onboarding any new MIFID regulation or directives. However, they have clearly stated that they are looking to at least match the ambition of the EU. In the recent letter to the FCA, HM Treasury indicated that the future objectives of the FCA must be aligned to mobilising private capital (investment and pension funds) to meet the Net Carbon targets set by the UK Government by 2050.

The response from the FCA came through a virtual town hall meeting on 13 April where they stated:

“Financial markets will have a crucial role to play in making the transition to a carbon neutral UK, and as the supervisor of these markets, we intend to play our part.”

The direction of travel in this space is indicating that there is every probability that the UK (FCA) follow a very similar path, therefore advisers may want to start or enhance the process of embedding Responsible Investment into their investment strategies

For more information

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