Financial advisers and providers should not underestimate the extent of what will be expected of them under the new Consumer Duty, according to the Financial Conduct Authority.

The regulator said the Duty will be a 'significant shift' in what it expects of advice firms. 

The watchdog will expect advisers to make lasting changes to culture and behaviour, Sheldon Mills, executive director, consumers and competition said in a speech at the Consumer Protection in Financial Services Summit yesterday.

He said: “The duty will require all firms, whether designing, selling or advising on products and services, to put their customers’ needs first.

“Trust and confidence in financial services is key and achieving good outcomes for consumers will help do this. I worked closely with many firms during the pandemic and really saw the industry pull together to support consumers, businesses, and the wider economy. We began to see the trust growing. The new Consumer Duty will help build on this. And this ultimately benefits businesses, the economy and growth and productivity.”  

The FCA recently extended the implementation deadline for the new Consumer Duty with first implementation deadline at the end of October and the full rules applying from 2023.

Mr Mills clarified that while it does not expect advice firms to have fully embedded the Duty by the end of next month, it does expect them to be able to provide evidence that their plans are sufficiently developed to be fully implemented by July.

Mr Mills added: “We recognise the efforts that firms are making to implement the changes required to meet our requirements under the Duty. We have listened to your feedback and extended the implementation deadline to ensure we get this right. This doesn’t mean meeting the deadline will be easy, but we believe the benefits are more important now than ever given the macroeconomic pressures we all face.”  

The FCA also said it was making its own changes to get ready for Consumer Duty.

It said it will adapt the data it collects to be focused more on consumer outcomes and will be ‘seeking evidence’ from firms of what consumer outcomes are being achieved, and how firms are assuring themselves they are meeting these outcomes.

The FCA’s new duty is one of the biggest overhauls to UK financial regulation since the Retail Distribution Review. It will introduce a sweeping new set of rules which will require firms to do more to protect consumers from harm and bad financial decisions.

From July, firms will be required to do everything possible to avoid “consumer harm” at every step of the customer journey.

The new rules are focused on the provision of value to consumers and evidencing it.

Under the new rules, which will come into force in July, Financial Planning firms will be required to:

• Act in good faith towards retail customers
• Avoid foreseeable harm to retail customers
• Enable and support retail customers to pursue their financial objectives

Financial Planning firms will have to provide consumers with information they can understand, offer products and services that are fit for purpose, and provide helpful customer service.

Firms will also have to evidence what they are doing to meet the duty.