It would appear we are well and truly into Consultation Paper Season with no less than a dozen either released last month or are known to be on their way.

    CP21/13 is a little different to the others in that it currently feels like the re-working of some previous attempts to tighten up on the rules around TCF and to make them easier for firms and customers to understand. 

    The concern that seems to be around in the market is that whilst the intentions are great, the actual impact of this amongst the wider advice community may not really be felt as most firms are already on track with this in terms of client outcomes and fair treatment of customers. What it is unlikely to be able to tackle are the rogue advisers who are currently ignoring the rules and are likely to continue to ignore the new ones. 

    In terms of what the policy paper says and the likely hardening of the current rules, here is a brief summary of the 56 pages of the consultation paper; 

    ‘Consumer Duty’ applies to firms and not to consumers and the onus is on firms to consider whether their practices are fair to their clients. 

    Most people are now aware of the issues that clients face when dealing with product and service providers and the hope is that those layers of friction will begin to be eroded by this paper. 

    By making the new rules clearer and more transparent, the aim is to make enforcement easier for the FCA. 

    The intended clarity of the new rules is designed to make enforcement easier for the FCA. 

    The main points covered are: 

    • The consumer principle – a firm must act to deliver good outcomes for retail clients and always act in the best interests of their clients. 
    • Cross-cutting rules – firms must take all reasonable steps to avoid causing foreseeable harm to customers and take all reasonable steps to enable consumers to pursue their financial goals and objectives and again, act in good faith. 

    There are then 4 areas that the consultation paper covers: 

    • Communications – firms should communicate in a way that is reasonably likely to be understood and facilitates decision making and take proportionate steps to review and adapt communications to adhere to the above. 
    • Products and services – providers must be clear of their target market, any risks posed by their produces, and also be clear on product information. Distributors must do the same, and take steps to prevent the wrong consumer types from buying/receiving those products. 
    • Customers serviced – customer services must not unduly hinder consumers from acting in their own interests or lead to unreasonable additional costs for consumers including time cost. 
    • Price and value – firms need to consider the impact of charges or price over the lifetime of the product or service and check that the benefits to the consumer are proportionate. This does not mean the imposition of price caps though. In essence, here we are suggesting that firms are clear about whether there is added value by the firm being involved in the distribution of this product or service. 

    As we can see, there isn’t a huge change to how most firms operate, but it will be interesting to see what the policies look like once the consultation period ends. Please feel free to add your comments and feedback to the paper which is linked here.

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