EmployeesBenefits Brief – Consumer Duty FAQs
Consumer duty and how might it affect you and your employees?
The Financial Conduct Authority is introducing a new set of regulatory standards from the 31st July 2023 known as consumer duty. Consumer duty sets out clearer standards of consumer protection across the entire financial services industry and requires firms to put their customers’ needs first.
At Secondsight, we have always put our clients at the heart of everything we do. We see the new consumer duty rules as an opportunity to further enhance our client service and have approached the changes in this way.
We thought it might be helpful to explain what consumer duty is and what this means to you and your employees as our clients.
Your FAQs, answered.
Q: What is consumer duty?
A: consumer duty is a new set of regulations being introduced by the Financial Conduct Authority (FCA) that sets out higher and clearer standards of consumer protection across financial services. It aims, in the FCA’s own words to ensure firms, like us, “put themselves in their customers’ shoes” when communicating and designing financial services or products.
Q: Who is the Financial Conduct Authority?
A: The Financial Conduct Authority regulates the financial services industry in the UK. Its role includes protecting consumers, keeping the industry stable and promoting healthy competition between financial service providers.
Q: Why are these changes happening?
A: The FCA felt that not all financial services organisations were giving their clients the appropriate information they needed to make good decisions and may have been sold products or services that do not offer the benefits a client might expect.
The new consumer duty rules are being put in place to ensure organisations act to deliver ‘good outcomes for their retail consumers’.
Q: Were there not protections in place for clients before this?
A: There were, through the FCAs Treating Customers Fairly legislation, and consumer duty takes these protections further and aims to achieve a cultural shift within the industry and lasting changes in behaviour.
The new rules mean organisations need to prove that we are doing the right thing for our clients, and we need to be able to prove this with more measurable outcomes. Firms will be held accountable if they cannot demonstrate this to the FCA. Consumer duty will help the FCA spot unfairness or poor practice within organisations more quickly.
Q: What are we doing to meet the new regulations?
A: We have spent about a year working on ensuring we are ready to meet the new consumer duty regulation. We identified early in this process that we were already meeting a lot of the regulation, and we have taken the opportunity to make some changes, which we believe to be better for you, and your employees, which will enhance our overall client service.
The FCA has identified four outcomes that firms need to deliver to ensure fairness and demonstrate that they are putting clients’ needs first.
1. Consumer understanding: products should come with timely and clear information that clients can understand so they can make informed decisions.
2. Price and value: clients should receive fair value. Firms should satisfy themselves that the prices they charge are reasonable for the benefits and are consistent across all their clients.
3. Products and services: firms should be offering clients products that meet their needs, rather than pushing products that aren’t suitable or needed.
4. Consumer support: customer service should be appropriate across the customer journey with both digital and non-digital options. It should be as easy to make a compliant, switch and cancel products as it is to buy them.
Additionally, the FCA has added an extra emphasis on looking after vulnerable clients. And the four key drivers of this are:
1. Health: including conditions or illnesses that affect a person’s ability to undertake daily tasks
2. Life events: such as bereavement, a relationship breakdown or loss of employment
3. Resilience: a client’s ability to withstand financial or emotional shocks
4. Capability: a client’s level of financial knowledge and confidence in managing money
We have reviewed our services and are as confident as we always have been that we will continue to meet both your and your employee’s needs.
You and they will notice however:
- A refreshed look and feel to our documentation.
- More streamlined documentation written in plain English eliminating jargon.
- The ability to review documentation that supports any vulnerabilities your employees might face.
Alternative options offered to support employees who face any vulnerabilities which may include:
- Offering additional time to allow them to fully complete the service offered.
- offering the option of being accompanied to a meeting.
- breaking meetings into smaller sections over a number of meetings to allow focus and consideration of one area at a time.
Q: As an employer, what impact will I see as a result of consumer duty?
A: As one of our clients, you will not experience a disruption in our employer service, you will continue to receive the same great and fair service, support, and advice that you always have.
Where you provide your employees with access to advice or guidance on your workplace pension scheme or on financial matters in general you may receive a request from us, or your employee, to provide the individual with additional time or support.
This may mean using a future slot or adding additional time to your current employee services to accommodate this.
We will ask you to consider whether you are aware of any vulnerabilities your employees may have and whether you should allow them more time for their meeting. You can speak to your client experience team to arrange this, without disclosing the reasons for your request.
We understand that in many cases these vulnerabilities may be something you do not feel comfortable, or able, to share with us and we completely respect this. It also may be that we are unable to share the reasons why we have categorised an individual as facing vulnerabilities with you.
Part of our new processes will be to ask employees who have booked a meeting directly if they feel they face any of these vulnerabilities which would impact on their ability to fully benefit from the service you have provided.
We fully understand that we will not be able to anticipate all cases where employees are facing vulnerabilities, but we hope that these measures will help us to provide the best possible service.
A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Pension income could also be affected by interest rates at the time benefits are taken.
The tax treatment of pensions in general and tax implications of pension withdrawals will be based on individual circumstances, tax legislation and regulation, which are subject to change in the future.
Foster Denovo Secondsight is a trading name of Foster Denovo Limited, which is authorised and regulated by the Financial Conduct Authority. Registered office: Foster Denovo Limited, Ruxley House, 2 Hamm Moor Lane, Surrey, KT15 2SA SSCDFA