One year after the UK regulator Financial Conduct Authority’s (FCA) Consumer Duty regulations for financial services firms were introduced, research has shown that 41% of customers have not noticed any changes in their treatment.
According to the Moneyhub research, much work remains to be done to fully realise the business and consumer benefits intended by the new regulations. The research, which surveyed 2,000 UK consumers, found that only 22% have noticed improvements in how they are treated since the Consumer Duty regulations took effect.
However, 13% of respondents said firms have failed to deliver good quality support and after-sales care, while 12% felt that communications were insufficient to help them make effective financial decisions. Additionally, 10% of consumers believe that firms have failed to offer suitable products and services that meet their needs.
Generational differences in noticing changes in firms’ behaviours are also significant. While 40% of younger respondents reported seeing changes in how banks interact with them, only 5% of those over 55 noticed any difference.
Looking forward, many customers remain optimistic about the potential impact of Consumer Duty. Over 42% said they believe that it will positively affect the quality and range of products and services available, with this figure rising to 53% among younger respondents. Similarly, 40% think Consumer Duty will significantly impact customer servicing, a sentiment shared by 48% of younger respondents. Additionally, 36% believe that Consumer Duty will drive banks to become more customer-centric, akin to building societies.
July 31, 2024, was the deadline for FCA-regulated companies to review closed products and services against all aspects of the Duty, prompting a re-evaluation of whether current products remain appropriate for existing customers. The FCA has consistently emphasised the importance of data in responding to Consumer Duty. Their recent multi-firm review of insurance outcomes underscores the need for firms to use new data sources to design comprehensive measures that evaluate both consumer and process outcomes. According to the researchers, this proactive approach ensures that vulnerable customers receive outcomes equivalent to those of non-vulnerable customers and that continuous monitoring leads to improvements.
Ahead of the one year anniversary of the CD, Mandeep Bhandal, senior policy adviser at the Investment Association, commented: “The investment management industry has worked extremely hard to meet the final stage of implementation, with a key focus on preparing the first annual board report. We look forward to working with the regulator, our members and other stakeholders in the retail distribution chain to continue to promote enhanced customer delivery based on high standards of governance and culture.”
Helen Slater, regulatory manager at financial data provider FE fundinfo, highlighted that the FCA took the opportunity to announce a call for input into the complexities experienced by firms when implementing the rules.
FCA Consumer Duty: What UK firms need to know
Slater said: “We all know that regulatory creep and duplication are inevitable when rules are designed to be overarching and cover a wide range of firms, products and consumers. So, the FCA’s announcement will allow firms to raise their concerns with the regulator by October 31. Duplication makes the rules longer than necessary but shouldn’t make them harder to comply with; it will be more interesting to see if firms can identify any areas where adhering to the Consumer Duty may make compliance with other rules harder.
Slater also highlighted that the FCA stated that at least 50% of consumers are vulnerable at some point due to their financial circumstances, life events, health issues, and understanding of financial matters. “What should be easier for firms to work with is the introduction of closed products to the scope of Consumer Duty, as no communications are aiming to get consumers to part with their money. The focus should be on checking whether the products deliver what they had promised and whether there are any unreasonable barriers to switching out to other products,” he added.
Mike Barrett, consulting director at financial services consultancy lang cat, pointed out that the Consumer Duty has triggered an “overhaul of the advice sector”. “The requirement to have a clearly defined target market, and represent fair value, has naturally resulted in advisers ensuring they offer their services to those with the most assets and complex needs. Advisers run businesses; they are not paid to deliver social policy. However, change is required to ensure more consumers can access financial advice and support when needed.”
