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The FCA's Consumer Duty regulation is 'gilding the lily'

21 June 2021

Bob Hunt

Bob Hunt

21 June 2021
Over-egging the pudding. Gilding the lily.
 
Call it what you will but I can't help feeling that the FCA's most recent attempts to 'beef' up its consumer protection in retail financial services, is a version of the above.
 
The regulator is now calling for feedback on its Consumer Duty regulation which will bring with it another set of principles, rules and guidance designed to do what the existing regulation is already supposed to do.
 
I wouldn't say we're close to getting to a point where the FCA is making work for itself but consider this part of the consultation - the regulator wants feedback on whether firms 'must act to deliver good outcomes for retail clients' or 'must act in the best interests of retail clients'.
 
Semantics, much? The FCA suggests there is a difference in tone here. I'm trying, for the life of me, to work out what it is and how, in any, way, shape or form it really matters or differs from the existing regulation.
 
Working in your client's best interest

There's no doubting there's a requirement for financial services regulation which insists on firms working in their client's best interests or delivering good outcomes for the customers. Absolutely.
 
Which is why we have numerous layers of such regulation already. It's why we have the Treating Customers Fairly principle; it's why, as AMI's Robert Sinclair pointed out in this very publication, "They have all the tools in their toolbox to do it already. They don't need more ideas, concepts or principles."
 
If this repetition or development of regulation to replace rules and guidance which already exists is a major part of the FCA's workstreams, then no wonder we are seeing budgets rise and the fees charged to regulated firms increase.
 
We should also seek to answer from where this work is coming from. By that, I mean is it based on a mortgage market, for example, that repeatedly gets it wrong? That does not get good outcomes for clients? That is inundated with hundreds, if not, thousands of complaints to intermediary firms week-in week-out?
 
You'll have already guessed my answer to those questions. Of course it's not. The number of complaints about residential mortgages upheld by FOS was actually down last year on 2019.
 
The endless paper trail
 
So, what will this mean for firms in the future? Robert seems to think more bureaucracy and documentation to evidence compliance, with firms not materially changing anything. The fact being they are already doing this anyway.
 
I'm all for ensuring consumers are protected, that regulation works in their best interests and that advisory firms are upholding the very highest standards. In a way, the FCA should be proud of its record here because, when it comes to the mortgage market, that is exactly what it has achieved.
 
But, more regulation for regulation's sake, is not the way to move forward. This further round reminds me of that old advert about littering with the teenager throwing rubbish on the floor and saying, "It's alright, my Dad says it gives people jobs."
 
Even more galling here is that the mess didn't exist in the first place, and advisory firms are being told to use their investment and resources to tidy things up.
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