The FCA’s call for input on its handbook post-Consumer Duty is set to close later today (31 October).
The consultation was launched in July, with the regulator seeking feedback on how it can simplify retail conduct rules and guidance.
In July, the regulator said it was particularly looking to address potential areas of “complexity, duplication, confusion, or over-prescription”, which create regulatory costs with “limited or no consumer benefit”.
Ahead of the deadline for input, Dom House, lead consultant at Simplify Consulting, says the review is welcome following the introduction of the Consumer Duty.
“It is important that the financial services regulations stay up to date and focus on the overriding objectives to protect consumers and promote competition.
“We believe the review should consider how the FCA ensures that the principle-based regulation of Consumer Duty balances against more directive regulations that exist in handbooks such as COBS and CASS.
“In particular where there is overlap between differing rules, the FCA should look to simplify and consolidate based on their objectives. This may also be the case for the rules on Vulnerable Customers, which we know is a focus for the FCA.”
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Steven Cameron, pensions director at Aegon, also welcomed the call for input, saying the firm sees scope to simplify rules around product disclosure and illustrations.
“Consumers could also benefit if the FCA rules made it easier to move from paper-based to digital communications,” he says, “which can be more engaging and allow firms to track actions taken by consumers to deliver better outcomes.
“Ironically, the consultation around the Value for Money Framework for workplace pensions which closed earlier this month includes particularly prescriptive rules which we hope will be simplified before going live.
He adds that, overall, the Call for Input may be a little premature to reach firm conclusions.
“While we know the Labour Government was keen for the FCA to consult, certain aspects of the Consumer Duty only came into force in July and it may take more time to fully assess scope for simplification within an evolving regulatory approach.”
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David Odgen, head of compliance at Sparrows Capital, says the frequency of regulatory change can be “dizzying”.
“It is very demanding to review consultation papers and subsequent policy statements and guidance and assess the impact on internal practices. Just in terms of time spent it is expensive and distracting but actually changing systems to cope is expensive in every sense. Particularly for smaller firms it is extremely difficult to carry out any sort of accurate cost benefit analysis. Unless there is very clear evidence that a change will be of clear and measurable value to end clients then there should be great hesitancy to implement said change.
“While acknowledging that there will be very little appetite for regulation that is prescriptive as that tends to mean, inevitably, a one-size fits all approach there is room for more guidance in my opinion. An example recently heard from the FCA was in respect of firms that provide intermediated services to retail clients with whom they have no direct business relationship. We all understand that the services should be appropriate for that ultimate target market but I see little clarity as to expectations regarding any particular steps to be taken or how good real client outcomes can be evidence. A lot of firms in many sectors of the industry are in that position.”
He added that all firms should be focused on client outcomes, which is “what really matters as confirmed by the Consumer Duty”.
“With that front and centre there is a need to look at all rules and really understand why they need to be there for the benefit of the client and what would go awry if they were not.,” Ogden explains. “I don’t think it was ever the intention that clients would get enormous volumes of paper which we must acknowledge is probably not read in its entirety by a very high percentage of individuals.
It is very difficult for firms providing required information to assess what is necessary or useful and what is not but there is always a risk that if genuinely useful and important material is part of a very large pack of which some is less useful there must be a heightened risk that the key details are not full appreciated and understood.”
