‘Twas the night before Christmas. In the regulator’s house, plenty were stirring, no doubt looking at the letter received from Sir Keir Starmer, Rachel Reeves et al, asking various regulators for ideas for reform that could boost economic growth. The Christmas dinner chat the following day must have been real fun for all the family.
The watchdogs, including energy regulator Ofgem and water regulator Ofwat as well as the Financial Conduct Authority, were given until mid-January to respond, which does lead one to question how well thought through any new ideas would have been.
We Are The Champions: How the role of Consumer Duty champions is evolving
The FCA’s own response was sent on 16 January, complete with the delicious opening line of: “I welcome your letter of 24 December 2024.” Yes, I’m sure that was the reaction when it was received.
Most of the FCA’s response appears to have been said through gritted teeth, reminding government that: “We already had significant work in train for this year.”
While a large part of the letter is devoted to this existing work, there are a few new ideas emerging. One that stood out was the suggestion to “remove the need for a Consumer Duty board champion now the Duty is in effect”.
Just because something is working well and now “in effect” doesn’t mean it should be removed. “We are removing the need for our iceberg detection system now that we have sailed halfway across the Atlantic”?
Consumer Duty processes may well be fully embedded within organisations but the notion that tangible change is being felt against each of the outcomes should be rejected, at least from the advice professions’ perspective.
It’s clear to us that there are still embedded, systemic issues within the provider side of the sector
Our most recent temperature check of this – within State of the Advice Nation Wave 7, where fieldwork took place in Autumn 2024 – found the majority of advice professionals state that progress against the products and services and the customer support outcomes was either a “waste of time” or “some improvement but work needed to comply”. Over 85% fall into either of those brackets against both outcomes.
If the role of the Consumer Duty champion is to go, then this should be accompanied by an increased responsibility for all board members, embedded into the Senior Managers and Certification Regime, ensuring the board is held to account and continues to put customer outcomes first.
The FCA’s own work, looking at good and poor practices in board oversight has called for more challenge from the board to ensure good outcomes, alongside more evidence of these discussions driving effective action. However well or not this board oversight is performing we are still at the early stages of Consumer Duty being embedded in all firms.
Firms hoping for Consumer Duty rollback set for ‘disappointment’
Our adviser research shows an advice profession that is supportive of the aims and objectives of the Consumer Duty but would like to see more evidence of these rules actually being enforced to stamp out bad actors and poor customer outcomes.
It’s clear to us that there are still embedded, systemic issues within the provider side of the sector that severely hamper sector productivity. If you want to improve growth, this drag needs to be removed.
The Consumer Duty gives the regulator the tools to enforce improvements, but it is too early in the regulatory lifecycle to be making changes. Doing away with the board role of the Consumer Duty after only 18 months is questionable at best, and worse, risks causing consumer harm which in turn will negatively impact trust in and growth of the financial services sector.
The best way to support growth and to improve the financial resilience of the nation is to improve the reputation of financial services. The very thing the Consumer Duty was designed to achieve.
Mike Barrett is consulting director at The Lang Cat
Sigh. We had ‘consumer duty’ for some 100’s (from 1215 AD?) of years before the FCA wrote their 4 page straw man at the beginning of the CD CP. A Duty of Care is a standard Common Law thing. And as to ‘value’ that is entirely subjective and can only be judged by the client (consumer).
As to ‘support growth’ Trump and Milie have already shown what is required. Shut down the technocratic managerialist utterly unaccountable bureaucratic state, e.g. the FCA, and let us sort out the mess they have created. Econ 101.