Simon Harrington, head of public affairs, said: "The benefit of the duty is that it should, in theory, drive out instances of egregious price gouging for products and services where they exist – and in this particular construct it is important to note that the consumer duty does not solely apply to the wealth and financial planning sector.
"The consumer duty should focus the mind of firms on why and how they charge for products and services, it does not necessarily follow logically that the conclusion drawn from this will be that firms conclude that they should charge less."
Shift in focus
The consumer duty is a key part of the current supervisory agenda of the FCA. It represents what Green called "a shift of the regulatory pendulum" in that principles and outcomes based regulation - discredited in the wake of the financial crisis - is making a comeback. This poses some difficult questions for firms.
"The consumer duty is about raising standards but it is about raising standards in a very non-prescriptive way.
"They don't put in place a sort of list of prescriptive rules, they're very much focused on outcomes, so securing good results for retail clients. And they beg some very difficult questions about, well what does good look like, what is a good outcome."
The other big shift, she said, was the issue of responsibility that was being placed on all firms in the distribution chain.
"What the consumer duty now says is that if you are operating in a distribution chain, because you might be the manufacturer of a product which ultimately makes its way to a retail customer, or you may be supplying components for a product [...] you need to be thinking about outcomes for them and certain specific outcomes like price and value and customer support, and product governance, among other things."
She said that was challenging because some firms higher up in the distribution chain may not have access to information about the end client.
And this in turn could change their relationships with intermediaries, she suggested. "Up until this point there may well be distribution agreements in place but they will not be as detailed around the flows of information up and down the distribution chain. And you won't see provisions in them that will say things like 'if it comes to our attention that you're doing things hideously wrong we may need to go and talk to the regulator because we have that obligation to do so.
"I think that relationships are changing and do need to change in order to cater to these new rules."
