Financial services, like many other sectors, is a highly regulated field. Next year new rules will see an even greater duty of care placed on UK financial services firms in order to protect consumers. David Pugh, our CEO, shares some thoughts on what’s changing and why it matters.
In a perfect world, there’d be no need for regulators to prevent businesses from behaving badly. Water companies, phone companies, railway operators and financial services providers would all choose to do the right thing voluntarily, without the need for a regulator keeping an eye on us.
But as we’re all aware, real life falls a long way short of that perfect world. And there are moments when we’re painfully reminded just how short we are falling. The new initiative known as Consumer Duty, recently announced by our regulator, the Financial Conduct Authority (FCA), is a case in point.
Consumer Duty makes a number of demands of the financial services industry, with severe penalties for firms that fail to meet them. Its big, overarching idea is to insist that firms “must act to deliver good outcomes for retail customers.” Specifically, it demands that consumers should “receive communications they can understand, products and services that meet their needs and offer fair value, and get the customer support they need, when they need it.”
I have to say, without wanting to sound sanctimonious, that it’s pretty depressing that these things need saying. Are there really firms out there that don’t currently meet these requirements? Ones that aren’t acting to “deliver good outcomes for retail customers”? Who send out communications their customers can’t understand, provide products and services that don’t meet their needs, offer poor value and won’t provide necessary support when customers need it?
I’m not so complacent as to believe that at The Fry Group we achieve all of the regulator’s stated requirements 100% of the time. But we get as close to them as we possibly can – and not because we have a regulator that’s telling us to, but because we have created a culture that will not accept anything less. It’s not easy to summarise something as multi-faceted as a business’s culture in a handful of words. But among the words you’ve heard from me on many occasions which, taken together, say something important about our culture: our purpose is to help people achieve financial freedom, and our values OneTeam, Passion, Excellence and Delighting Clients.
Both mean something to everyone in our team, and we couldn’t and wouldn’t say them if, we knew that we were falling significantly short of any of those Consumer Duty requirements.
The FCA announced this major new initiative earlier this year, but it won’t be implemented until July 2023. A cynic might say that’s because the regulator knows that some firms will need that long to make a break from their bad habits (and, worse means they can carry on with their incomprehensible communications, poor-value products and all the rest of it for some months yet). In truth, that’s a bit unfair. Even firms which need to make very few changes to the way they do business (and we count ourselves in this group) still have some work to do putting in place the documentation and reporting structures that the FCA requires so that we can prove we’re fulfilling our duty.
Still, it’s good to know that from next July, all regulated UK financial services firms – from the very biggest to the very smallest – will be bound by a set of new rules and regulations to ensure that they treat their clients and customers properly.
But it would be even better to know that they really didn’t need to be.