This is the final adviser blog, in a series of three, explaining the purpose and impact of the upcoming Financial Conduct Authority (FCA) regulations on Consumer Duty.
This blog considers the third of the three Cross-Cutting Rules: “A firm must enable and support retail customers to pursue their financial objectives.”
For background details on Consumer Duty, please take a look at the opening section of our first blog on Consumer Duty.
Consumer Duty looks to three Cross-Cutting Rules. Let's look at the third Cross-Cutting Rule.
The third Cross-Cutting Rule is that a firm must enable and support retail customers to pursue their financial objectives. This rule relates to the financial aims of the customer and applies across the entire customer journey, and the life cycle of the product or service.
Just like each of the principles which underpin Customer Duty, the rule does not dilute or remove your customer's responsibilities for their actions. However, for customers to be responsible, they need to be supported in making well informed decisions.
This means that firms should focus, proactively and reactively on enabling customers to be in the best position to make well considered decisions regarding their financial objectives.
This includes recognising and being mindful of the behavioural biases of your customers, and the effect that vulnerability can have on their choices.
Just like Cross-Cutting Rule number two (acting to avoid causing foreseeable harm), this rule is based on reasonableness. So, an assessment of the actions taken by a firm would be based on what is within the firm's control, based on their knowledge of the customer, and the conclusions they can draw about a customer's objectives.
A firm offering advisory or discretionary services would naturally have a good understanding of the customer's particular objectives and would be required to act on that information.
If a firm decides that they cannot provide a customer with a specific product or service, the firm should assess if there is information or support it could offer to help the customer fulfil their financial goals. So, for example, a firm could signpost a customer to a third party that provides reliable and relevant information to customers like theirs.
Firms need to enable and support customers to pursue their financial objectives at each stage in the customer journey.
Firms can support customers by:
Firms can support customers by:
The FCA are clear that this rule and the overall Consumer Duty do not require firms to go beyond what is reasonably expected by customers in service delivery:
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