The Consumer Duty Alliance, the not-for-profit professional body supporting the FCA's Consumer Duty standards, has welcomed the Chancellor’s unexpected decision to order a review of some elements of the Duty.

In her Mansion House speech yesterday (15 July), Chancellor Rachel Reeves said she had tasked the FCA with reviewing the impact of the Consumer Duty, introduced by the FCA in 2023, on wholesale providers such as asset managers.

She has asked the regulator to review by 9 September the regulations’ impact on wholesale providers who may only deal with professional clients and not consumers. The move is part of her reforms designed to boost financial services growth and scale back unnecessary regulation.

She told the Mansion House: “I am introducing new targets for the FCA and PRA to cut times for authorisations and approvals and I have tasked the FCA with assessing the impact of the Consumer Duty and whether it unduly effects (sic) wholesale activity to ensure that regulators are really regulating for growth.”

The Chancellor was responding to critics who say that the sweeping measures in the Consumer Duty have had a number of unintended consequences, including potentially restricting the availability of financial advice by making it more expensive and may also be having other unintended consequences in the wider market.

Keith Richards, CEO of the Consumer Duty Alliance, said the Chancellor’s speech and proposed consultation was not unexpected and in line with FCA stated intentions to reduce red tape.

He said: “A consultation is therefore both welcome and a constructive mechanism to engage all stakeholders to identify barriers to growth but also how we can move forward to raise standards together.”

He added that the Chancellor’s speech and proposed consultation, closing on 9 September, aligned with the, “evident change of approach and new era of regulation” the industry was seeing from the FCA over recent months.

He told Financial Planning Today: “We, and many of our members and affiliates, have been experiencing greater visibility, collaboration and engagement from key FCA departments and leaders over the past eighteen months. We also saw the first FCA consultation to reduce red-tape launched in 2024, coupled with the Advice Boundary Review aimed to increase access to financial guidance and advice.

“The move from prescriptive rules, which have often caused unnecessary bureaucracy and a tick-box box mentality across all sectors, to the outcomes-based Consumer Duty has already led to many reported examples of better consumer and business outcomes and the momentum is growing. The Chancellor’s proposed rebalancing of SMCR requirements and reducing red tape for authorisations is timely and will be widely welcomed across all sectors.”

“Consumer Duty is part of the solution as it empowers firms to change and simplify processes which otherwise hinder good client outcomes but as with most major reforms, there are different levels of understanding amongst firms and a general reluctance to follow their own initiative for fear of getting it wrong.”

The Treasury said that there was a "consistent feeling" that the FCA was applying an approach to regulation that was "too one-size-fits-all." This was felt, in particular, by asset managers and other wholesale firms.

Many of the respondents to a cross-cutting Call for Evidence paper mentioned the "scope and application" of the Consumer Duty as a notable case of consumer protection extending to firms who do not serve retail consumers or sell products directly to them. The Chancellor has asked the FCA to report back to her by September on how it plans to, "address concerns about the application of the Consumer Duty for firms primarily engaged in wholesale activity."

The FCA has been asked to set out how it plans to deal with concerns about the way the Consumer Duty is working for, "wholesale firms engaged in distribution chains which impact retail consumers" and provide certainty on the categorisation of professional clients. It will test its plans with market participants, industry and consumer groups before reporting back, the Treasury says.