The Financial Conduct Authority published its long-awaited policy statement and final guidance for its new Consumer Duty requirements this morning.

Ian Else, founder and Financial Planner at 4 Financial Planning, welcomed the new rules but questioned if the FCA has what it needs to properly enforce them.

He said: “The new duty will not make a difference to how we do business, not even a little bit. It’s music to my ears. However, I question whether the FCA really has what is needed to make this work.

“There are far too many people getting rich in this industry who don't deserve it and I'm talking about the shareholders of some of the providers who refuse to invest in systems and development to improve consumer outcomes and financial advisers and wealth managers who are charging for Emirates first-class and delivering Ryanair.

“The rules aren't my concern, it's the enforcement of them that is. If they are properly enforced, across the board with the regulator not just picking the low-hanging fruit, this could have as big an impact as RDR did.”

The main change to the rules today was the extension of the timeline for implementation for firms to July 2023 (from April 2023). 

Mr Else said he thinks the implementation timeline is too long. He said: “What world do we live in where our regulator has to explicitly tell us that we need to put the needs of the clients first? Any business that needs months to implement changes to achieve that should hang their heads in shame.”

Michael Stimpson, partner at Saltus, said the timelines for the implementation of the new duty are manageable for firms of Saltus' size but could be a challenge for very large advice firms.

He said: "The timelines are manageable for a firm of our size to implement plans for how we are going to evidence compliance with the duty.  It will be very difficult to adapt systems to collate sufficient MI to be able to provide the data outputs and analysis in the timescale.  The larger the firm, and the more legacy books they have, the more difficult that will be.

"Saltus has acted with the client at the centre of our thought processes as a part of our DNA, so the core of our decision making and approach is unlikely to change.  The change will come in the data we will now look to collate to provide evidence how we are doing so.

"Now that we have the finalised guidance we will be able to review the Terms of Reference and output of each of our committees to ensure the right MI is able to be collated for documentation of the duty requirements."

Mr Stimpson also said he will be carefully watching how the FCA monitors and enforces the new requirements under the Duty.

He said: "Like everything that is outcomes focused, it is up to the interpretation of the individual firms as to how this is embedded.  This will inevitably mean that some firms seek to minimise the impact, while others will rightly look to act within the spirit, as well as the letter of the Duty.  The key to this will be how the FCA educate, monitor and enforce the requirements."

M&G Wealth welcomed the extended timeline for implementation of the new Consumer Duty, but warned that advice firms should not delay embedding the new rules.

Vince Smith-Hughes, director of specialist business support at M&G Wealth, said: “It’s good to see the FCA taking on board feedback from the consultation and giving firms additional time to embed the rules and guidance. However, this shouldn’t be a reason for firms to delay their preparation. Let’s not forget that requirements, such as the collection and collation of suitable MI for the annual report, will in some cases need new processes to be thought through and created well ahead of the official implementation.”

Warren Vickers, managing director of adviser network Tenet’s Compliance Services, agreed that advisers should not become complacent.

He said that many advice firms will find the new bar for evidencing value will mean changes to the way they do business.

Mr Vickers said: “The new Consumer Duty standards are a step change for the financial advice sector – there hasn’t been a comparable shake up since RDR. This should benefit all stakeholders in the long run and help advisers to demonstrate how they’re delivering good value and service for their clients. However, while the three-month extension is welcome, advisers are still faced with a tight deadline for implementation and mustn’t stray into complacency with their planning.

“This is a new and high bar to clear for evidencing value and before the benefits are felt there is the unavoidable pain of change to go through. Financial advisers need to ensure they have all the resources in place to meet the rising standards, which the FCA estimates might cost up to £25,000 for small businesses and could also run much higher for larger firms.

“We’ve already been working with advisers behind the scenes to relieve some of the burden and help them get ready, and with the final guidance published today we’re encouraging advisers to seize the day. One of the best ways to get a jump start is by completing a gap analysis as soon as possible, and exploring how innovative technology solutions can help bridge that gap, and we’ll be working side by side to support advisers with this along the way.”