FCA: Consumer Duty Focus Areas
The Financial Conduct Authority (FCA) has published their priorities under the Consumer Duty for the remainder of 2024/25, the areas of focus are:
Embedding Consumer Duty and raising standards
The FCA note the expectation of proportionality in firm approach to embedding Consumer Duty and further note that, where appropriate, the regulator will set out different approaches smaller firms could take and will share insights to make it easier for firms to understand what good and poor practice looks like.
The FCA have 3 cross-cutting projects (grouped into packages of publications in Q4 2024 and Q1 2025):
o Review of board/governing body reports and complaints & root cause analysis
o Review of treatment of customers in vulnerable circumstances
o Review of consumer support outcome and supporting informed decision-making
Enhancing understanding of the price and value outcome
In acknowledgement of firm challenges in conducting fair value assessments, the FCA advise they want firms to use robust analysis to demonstrate that they are offering fair value, and identify and take action where they are not. Firms are also signposted to previously published feedback on fair value assessments.
Further priorities include:
o Platform cash – treatment of interest of cash balances
o Market study into pure protection insurance - FCA will commence this market study in H1 2025.
o Unit-linked pensions and long-term savings - FCA expect to complete work in Summer 2025 and publish findings.
o Market study into premium finance - FCA plan to publish an interim report in H1 2025.
Sector specific priorities
Consumer Investments
In addition to the platform cash price and value work, other areas of focus are:
• Advice Guidance Boundary Review – Exploring how the Consumer Duty could help to close the advice gap so that firms enable and support consumers to pursue their financial objectives and make key financial decisions. In Q4 2024, FCA will publish a consultation on targeted support. In H1 2025, FCA plan to consult on rules for better support for consumers in retail investments and pensions.
• Tackling poor identification of clients with characteristics of vulnerability by wealth managers – In H1 2025 FCA will provide specific firm feedback and take appropriate regulatory action if necessary.
• The Packaged Retail and Insurance-Based Investment Products (PRIIPs) Regulation/ Consumer Composite Investments (CCIs) Regulation – Repealing and replacing the retained EU PRIIPs regulation with a new UK retail disclosure regime that works effectively for the UK’s dynamic capital markets and fosters informed retail investor participation. FCA will consult on draft rules in Q4 2024.
Realising the benefits of Consumer Duty
The regulator noted the ongoing review of wider rules to ascertain how Consumer Duty can be used to simplify requirements and reduce the complexity of the rulebook.
Call for Input on simplifying rules - next steps in H1 2025.
You can read the web-page in full here.
FCA publishes
proposed targeted support reforms for pensions
The FCA has published a consultation which sets out its proposed use of targeted support for pensions in accumulation and decumulation. This consultation builds on previous proposals set out in the FCA’s Discussion Paper published in 2023. Alongside this consultation, the FCA has also published a Discussion Paper which examines:
• the regulatory framework which governs projections, tools and modelling;
• requirements for individual DC pension transfers and consolidation; and
• the regulatory framework for self-invested person pensions.
Targeted support would exist between current guidance-based services and regulated financial advice. The FCA envisages that it would help consumers, at scale, make effective, timely and properly informed decisions about their pensions.
We retain concerns about the ability for firms offering targeted support to be able to direct individuals towards single product solutions and would welcome firm input both on this as well as the FCA’s view that it may not be appropriate for advice firms to deliver targeted support solutions alongside advised ones. Additionally, we consider that consumer segments set out within the paper – i.e. segments of consumers who should receive both targeted support and accompanying solutions – are too broad.
We will be responding to the paper and would welcome firm input either individually or through participating in our Advice Guidance Working Group which we will be reconvening at the beginning of January 2025.
Please feed any input into Simon Harrington who will be leading PIMFA’s response.
The consultation response deadline is 13 February 2025.
FCA: Complaints and root cause analysis review findings
The FCA has published findings of their review of complaints and root cause analysis to help firms in effective embedding and implementation of Consumer Duty setting out examples of good practice and areas for improvement.
Access the full publication here.
Read the PIMFA summary here.
FCA consults on proposals for amendments the AntiGreenwashing Rule and SDR
On 6 December the FCA published a consultation within the December Quarterly Consultation Paper CP 24/26 on minor amendments to the anti-greenwashing rule and Sustainability Disclosure Requirements (SDR).
The FCA is proposing to make amendments to the Environmental, Social and Governance sourcebook (ESG) and to update certain guidance provisions in other related sourcebooks for the purposes of clarifying certain existing rules and giving proper effect to the policy proposals consulted upon in Consultation Paper 22/20 and finalised in Policy Statement 23/16.
While these changes should not create any additional obligations for firms, we would like to hear your views. If you would like to contribute to our response, please get in touch with Maja Erceg
FCA to publish final rules on non-financial misconduct in early 2025
The FCA consulted on proposals to boost diversity and discussion in financial services in 2023. After extensive discussion, the regulator decided to prioritise proposals that tackle non-financial misconduct such as bullying and harassment.
The FCA has confirmed that they intend to publish final rules in early 2025, to be followed by FCA and PRA policy statements on the remaining diversity and inclusion proposals later in the year.
The FCA has updated its perimeter report. The report includes:
• A reference to the recent announcement that HM Treasury plans to consult to remove the current provision for the certification regime from legislation and work with the FCA to replace it with a more proportionate regime.
• A link to the FCA’s Policy Statement including final rules on the critical third parties regime.
• Information on investment trust cost disclosure, including the FCA’s plan to launch a consultation on the proposed new consumer composite investment framework before the end of 2024 (with a view to publishing the final rules in H1 2025).
• Confirmation that the FCA intends to continue working closely with the Government on next steps for bringing ESG ratings providers into the regulatory perimeter, including a planned FCA consultation on proposals for the future regulatory regime in 2025 (once the legislation is finalised by the Government).
Access the report here.
Modernising the redress system – webinar with Herbert Smith Freehills
As you will be aware, the FCA is currently conducting a call for evidence on the redress system – examining how changes can be made in response to mass redress events which will improve outcomes for consumers and firms.
We are currently considering our response to this Call for Evidence and to support this have enlisted the help of Herbert Smith Freehills who have kindly agreed to host a webinar for firms to talk about the issues raised within the paper as well as the wider implications of some of the proposals and some issues currently not on the table.
This webinar will take place on 13 January between 15:00 – 17:00. Firms who are interested in attending are invited to contact Simon Harrington.
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