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Editor’s Comment: A Duty to be proportionate
The FCA gave the broadest hint yet this week that it is ready to reform the Consumer Duty and cut out some of the unnecessary red tape.
The news will have been cheered by the Financial Planning community but it’s not quite Christmas just yet.
The hint came in a speech this week by FCA chief operating officer Emily Shepperd.
She gave a pretty good indication that the FCA is preparing to take the editing pen to some of the Consumer Duty rules, particularly where it spots “duplication” and “confusion or over-prescription.”
She accepted that these factors alone could be causing unnecessary costs for regulated business.
It’s too early to set off the fireworks but the FCA seems to accepting it may have reach a high tide in terms of regulation and will need, in some areas, to be more proportionate and about time too, many will say.
Most people applauded the spirit behind the Consumer Duty when it was first launched and the aims were and are commendable. Better communication for clients, looking after clients at all stages of the customer journey and making sure clients with legacy products were still taken care of.
These remain the right things to do and a major dilution of this would be a mistake but that’s not the full story.
At the same time as the Duty has pushed up box ticking it has also meant lots more work, particularly for adviser firms. There is strong evidence that some advisers have been forced to change processes considerably and the extra burden of more admin and record keeping has pushed up their costs. Some planners are on record as saying they have had to reduce the number of clients they serve or pass on less profitable clients to other firms.
The net effect may well be that Financial Planners are able to serve fewer, better off people and many who want and need Financial Planning can no longer afford it.
At the same time the FCA’s remit has been amended to hand it a duty (if I can use that word) to promote business competition and expansion. Hard to do this in a sector which may be shrinking in some areas and struggling with red tape.
The new Labour administration is on record as being keen to promote business growth and the FCA is likely listening as much to government ministers as it is to regulated advisers.
I do not expect massive change but I believe some of the more onerous requirements of the Consumer Duty may be trimmed back a little to make life a little easier and a bit more proportionate.
Ms Shepperd says with 172 responses to the FCA review of the Consumer Duty, the FCA is listening to feedback and “actively looking to refine the rulebook.”
These are good words to hear but we now need to see action to maintain confidence in the FCA’s ability to react and respond to market feedback.
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Kevin O’Donnell is editor of Financial Planning Today and a journalist with 40 years of experience in finance, business and mainstream news. This topical comment on the Financial Planning news appears most weeks, usually on Fridays but occasionally other days. Email: This email address is being protected from spambots. You need JavaScript enabled to view it. Follow @FPT_Kevin >Top Tip: Follow Financial Planning Today on Twitter / X @_FPToday for breaking news and key updates
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