Firms still need certainty and time to implement FCA’s Consumer Duty

PIMFA, the trade association for wealth management, investment services and the investment and financial advice industry, has today called on the Financial Conduct Authority (FCA) to give firms further time to fully understand and implement its wide-ranging Consumer Duty proposals.

In its response to the FCA’s consultation ‘A new Consumer Duty: feedback to CP21/13’ and further consultation, PIMFA argues that while the FCA’s updated proposals carry more clarity for firms, there is still significant scope for subjectivity within them.

More broadly, PIMFA argues the proposed implementation period of nine months is insufficient and does not reflect the importance the FCA has itself placed on the Duty’s wider impact on financial services.

Liz Field, Chief Executive of PIMFA, commented: “In our ongoing discussions with the FCA we have consistently asked for further clarity on the proposals that they have put forward. To their credit, this updated package of measures, in combination with the draft guidance produced, is clearer on the FCA’s expectations of firms.

“However, there is still scope for further clarity, and we have asked for updated guidance on a number of issues, as well as explicit statements of the expectations of firms. Throughout this process we have been clear our concerns around the Consumer Duty are less about the ability of firms to comply with it on an ongoing basis and more about the broader implementation challenge associated with, and the inherent subjectivity of, the proposals.

“We do not believe a nine-month implementation period is sufficient for firms to ensure the systems and processes they have in place are sufficient both to measure consumer outcomes and provide the level of reporting distributors will now have to send upstream to manufacturers. This is an industry which has undergone an enormous amount of regulatory change recently which, in combination with the ongoing impact of COVID-19, means resources are already stretched. We believe a two-year implementation period would be more suitable and are aware of other industries with even bigger implementation challenges who agree.

“Meanwhile, the inherent subjectivity of the proposals does remain a concern especially with respect to the application of the Duty by the Financial Ombudsman Service (FOS). We already have long-standing concerns about the lack of alignment between the FOS Handbook and that of the FCA. While we think it is right that the FCA have set their expectations to the FOS, we draw little comfort from this given it has no obligation to act upon these expectations. Ultimately, it is our uncertainty about how FOS will interpret the Duty and, in particular what is reasonable, which will drive whether or not the implementation of the Duty will ‘raise the bar for financial services’ more generally or simply open the floodgates for claims against an industry, which continues to do its best to provide good outcomes for consumers”.