When first approaching Consumer Duty it struck me that many may have volumes to say on this whereas I had little. The reason is not that I am unaware of what the FCA are bringing out but rather I saw no real difference from what Mr Downs has been hammering on at me since I took the corner seat 6 years ago.
Kirsty explains this most eloquently in her full review which is what you should file under "board matters"
But here is my rough view.
No more writing a policy and filing it away forever there is now a requirement for regular reviews.
Focus on clients meeting the products target market audience and suitability/ affordability.
Focus on advisers knowledge of the products in the market as well as demonstrating suitability back to the client.
A more intrinsic interaction with providers and a possibility of the providers requiring feedback data from intermediaries to sharpen their products.
Renewal needs to be a proper review and establishment of any changes with the client as well as research to ensure they have the best price/product and meeting its target Market.
A review of legacy policies all legacy policies will need a review in due course not from the first issue but as part of this change to ensure they still meet client requirements.
TCF but now hard and fast written into Principal 12 with demonstratable outlines of what is expected. With a focus on due care and avoidable harm.
A duty to emphatically demonstrate the reasons for the selection of a product as well as a regular review of the client and product to affirm continuing suitability.
A demonstratable ability to show understanding of the client as well as providing or arranging assistance for them to ensure they fully understand what involved.
For the intermediary, ensuring that the products selected are the most appropriate for the client whilst the manufacturers are now under a duty of care in their design of the products to ensure they meet the requirements of the client in a precise and cost effective way.
Where are the FCA going with this?
Firstly providers are going to have to sharpen up on the target market and intermediaries are going to need to ensure that any not meeting the target audience have full justification for taking a product.
This is rolling out similar levels of advice as required for advisers doing investments so they are in effect trying to ensure that there is a level process applied by all financial advice.
Explanation of products and constant knowledge updating of products on the market is now a given for advisers this alludes to CPD, as other suggestions have in the past, as well as minimum qualifications levels that may be required.
Renewals much be active â€“ assumption that existing products are still meeting client requirements cannot be made any more. There is a requirement of a multi-layered review of the product to ensure that the client understands what he is getting, it is still the most suitable and affordable product and that the client position has not changed in itself.
There is a move to acting in good faith and avoiding foreseeable harm. These two phrases may well be the opening argument of nearly every law suit. But as its now in the legislation its important that you take them to heart and be able to demonstrate this.
Back then to my opening lines why do I not see a big change here?
Essentially this has been preached by, John and now Kirsty, Charlie, myself. We have applied the requirements for Investments to Mortgage and Insurance firms since they changed in 2014 and continue to. Yes, it is now written in legislation with more power to act but it is still the same principals applied at every audit and filecheck we do.
Can you demonstrate that your factfinding covers soft facts?
Does your suitability report show that you have selected the most appropriate product, at the most appropriate price, having reviewed the market or panel as well as fully obtained the details of the client overall position linking to your recommendation?
Have you also fully explained this to the client in easy terms and included a precise breakdown of costs, benefits, research and drawbacks of any possible appropriate products?
Did you ensure you reviewed the client for any possibility of vulnerability and taken all possible steps to ensure that they have the required processes in place to be able to assist those that are?
Finally and most important these days if there is no appropriate product then selecting the least bad is not the right choice it needs a rework or the client needs to be told that in your view they are not suitable for what is out there.
These are incidentally some of the foundation of client retention. Know Your Client requirements on a personal level, provide them with a great service bespoke to their needs and ensure that you proactively review their situation regularly with them.
Not rocket science to say treat your customers fairly but the industry is in bad enough shape that the FCA need to put it in writing, and make it a Principle; the highest level by which a firm must comply