The FCA has said price and value is the most challenging outcome of the Consumer Duty for adviser firms to meet seven months after the regulation came into force.
FCA’s executive director for consumers and competition Sheldon Mills said firms should do more on fair value and pricing to ensure good outcomes for consumers.
He said: “Many of the fair value assessments we have seen are not relying on solid data and other credible evidence to justify the products’ value to retail customers.
“Some firms, for example, have relied solely on benchmarking against the market when considering their pricing, rather than considering a fuller range including the real value that a consumer derives compared to the price they pay. The equivalent of a Google Shopping search does not prove to us that a customer is getting a fair deal.
“We want to see firms considering all the aspects of fair value at the product level and considering the impact on different consumers.”
Mills, who made the speech yesterday (21 February) at a KPMG conference, highlighted the challenging role of the FCA in regulating the marketplace.
“We do not set prices: our job is to make sure that markets can work well. They can’t if products and services fail to offer fair value, or if they offer features that lead to foreseeable harm.”
He noted the improvements some firms have made, such as changing their fee structure because of the new consumer charter.
Recent research from Royal London found that 37% of adviser firms have changed their fee structure after completing the Consumer Duty fair value exercise.
And over two thirds (67%) of the respondents agreed that the work needed to carry out the fair value assessments has been worthwhile.
Despite this progress, Mills said firms “could do better” in some areas to drive good consumer outcomes.
He also highlighted fair value in closed products as another area of challenge for firms.
“We know some closed products may offer poor value. In some cases, customers in legacy products might pay higher charges than they would for open products, where firms are competing for new business.
“In all situations, firms must assess and be able to demonstrate that their closed products provide fair value to customers,” said Mills.
“We don’t necessarily expect firms to re-price products or to repeat underwriting in every case if conditions such as life expectancy or economic conditions have changed.
“However, if a firm could have reasonably known that its assumptions were significantly wrong at the time a product was sold, we will consider if the firm complied with rules that were in place at the time.”
Meanwhile, he warned that the “clock is ticking” for closed products, which will come under the scope of the Consumer Duty at the end of July.
The duty came into force last July, but firms with closed products were given an extra year “to get to grips with the complexity of older systems and the increased work involved”.
Mills highlighted some of the concerns firms with closed products have raised ahead of the July deadline.
They include evidencing good outcomes for consumers, addressing gaps in the customer data, determining fair value, taking action on less engaged customers, and ensuring that the design of products and services deliver good consumer outcomes even where firms have vested rights.
We’re still awaiting publication of the FCA’s Consumer Duty programme for its own activities, which presently offer neither fair value or good consumer outcomes. Consider the claims on its own website:-
1. We protect consumers from the harm caused by bad conduct in financial services. Wot, as with Bassett & Gold and LC&F?
2. We aim to support a healthy and successful financial system. Wot, like taking steps to prevent wildly unsuitable asset allocations via SIPPs?
3. We promote effective competition in the interests of consumers and take action to address concerns. Wot, like acting swiftly and effectively on whistle blows?
Just a load of sanctimonious rubbish.
Julian – there is no way on this plant that the FCA can demonstrate ‘value’ as they do not offer their services (hah!) on the open market in competition with other service providers from which consumers can select their preference.
The CD is complete dingoes kidneys.
Oh dear Sheldon – ‘value’ is subjective. And it is incumbent upon all enterprises to maximise their prices.
Well said Julian. Hardly a day passes without another report of a rip off and consumer harm. Just today reports of Satchi & Hartreel. An LCF type fraud advertised on Google. The scams were started as far back as 2019. The regulator wasn’t just asleep, they were comatose. Protecting the public – too difficult. Much easier to micromanage decent practitioners with evermore onerous & footling regulations. Price & value indeed. When did Sheldon Mills ever run a business? Let the market decide on price & value. Clients should be perfectly able to see if they are getting value for money. If they don’t like the tariff they can always go elsewhere. Do solicitors, accountants, dog walkers or anyone else have to jump throgh these hoops?
These frauds are largely the result of failed regulationism as investors desperately seek a yield or any positive return in an age of catastrophically bad money, ZIRP and inflationism. Plus utter failure by the nationalised education system to teach any sort of sane economics or even simply good tried and tested home economics.
Same ole pattern of coercive controlling behaviour ….
All negative comments for the regulated, aimed to intimidate, humiliate with treats of punishment and harm
All positive comments when relating to themselves…
The FCA,s comments may well be subtle and flying below the radar which is why they employ lawyers for the upper floor seats
But it’s there hiding in plain sight !!
Yup