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The FCA must address corporate culture to focus on sound consumer outcomes.
The FCA must deal with the conflict between the objectives of firms and the needs of customers.
The legal concept of ‘Duty of Care’ already exists. Why introduce an FCA construct with no widely accepted meaning?

UKSA has responded to FCA’s latest consultation aimed at advancing the consumer protection landscape. It proposes a new ‘Consumer Duty’ to be imposed on firms. UKSA welcomes this limited progress but fundamentally it is more of the same: more regulation, more rules, more analysis.    

The FCA needs to address the conflict between the objectives of firms and the needs of customers. ‘Too many firms still treat the relationship as if it were short-term and transactional when what the customer wants and needs is a long term relationship based on trust’. The culture of firms is critical. But the word ‘culture’ appears in the 54-page consultation just three times. There is little serious discussion of its role in ensuring good consumer outcomes. Simply setting a ‘consumer duty’ as a regulatory concept is not going to change culture within the industry.

It is fundamental to understand why consumers are at a disadvantage when buying financial services. These include: asymmetry of information; lack of detailed knowledge and understanding; the often long-term nature of outcomes when buying investment products; lack of certainty and predictability in forecasting outcomes; and inability to assess the nature of services in advance. All of these are well understood by the FCA and many are referred to in the consultation paper, but often in passing and without emphasis. This muted approach can only be in deference to the industry being regulated.

It would be much better to focus on introducing a ‘Duty of Care’ on the part of firms rather than a ‘Consumer Duty’. A ‘Duty of Care’ is a concept that is well understood and has a degree of legal status. The term ‘Consumer Duty’ is an FCA construct which has no widely accepted meaning or currency.

FCA consultation CP 21/13 ‘A New Consumer Duty’ here

UKSA’s response here

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