The FCA will be looking to see whether a firm’s value assessment framework truly assesses whether customers are achieving good outcomes, as opposed to being a box-ticking exercise.
Firms will also need to demonstrate that they have carried out an assessment of their own fees as well as the cumulative impact of fees incurred along the distribution chain on the overall value of a product (for example platform and underlying investment product fees).
Ensuring this outcome is adhered to is likely to involve a review of a firm’s service proposition and charging structure, and any changes to this are likely to result in practical challenges.
FTA: If the regulator does approach an advice firm with an issue concerning consumer duty, how should firms respond?
CW & BN: As with any regulatory engagement, firms should engage fully with the regulator to answer questions and provide any information relevant to its request.
Firms will need to be able to evidence the steps they have taken to comply with the duty. If there are any remaining gaps, firms must have a clear plan demonstrating how these will be implemented, within an appropriate timeframe.
Firms should also be able to demonstrate how they will continue to meet the requirements of the duty on an ongoing basis, including the systems, processes and controls that are in place to ensure compliance with the duty.
FTA: What is the quickest and best way to appease the regulator?
CW & BN: The duty is centred around achieving good outcomes for consumers. Firms must be able to demonstrate that the client’s perspective is at the forefront of both their implementation and embedding activities.
The FCA expects firms to prioritise areas that run the risk of greatest harm to consumers, so ensuring implementation activities are complete in these areas is crucial.
Firms can help to evidence their work by ensuring the implementation approach is documented, with any previously identified gaps having a clear rationale for closure.
FTA: What should advice firms do before July next year when it comes to closed products or services? Any areas of particular concern?
CW & BN: Advice firms will need to conduct a review of client portfolios to identify any closed products being held. The size of this task will vary across advice firms and they should be able to demonstrate this review taking place.
Once closed products have been identified, firms must be prepared to put in place the same level of oversight and infrastructure as open products.
