MAE23: The new ‘treating customers fairly’ - how Consumer Duty is not about ‘truncating fees’ 

Speaking at today’s Mortgage Adviser Event Glasgow, Steven Howard – head of mortgage and lending intermediaries compliance services at SimplyBiz – said that advisers must do a ‘gap analysis’ of their current circumstances and what is needed to meet the Consumer Duty rules coming into effect on 31st July this year. 

Designed to impose a ‘higher and more exacting standard’ of conduct, the rules aim to remove poor practice – with Howard sharing examples such as using the same generic factfind for later life lending products as for standard residential cases; so-called ‘sludge practises’ which discourage cancellation by making it difficult; or  elements of a product or service that consumers are unable to use.  

Howard said that Consumer Duty rules were ‘probably the most significant piece of work from the FCA’ since the Senior Managers and Certification Regime and that these rules were building on the ‘clear senior management requirements and responsibilities’ set out by SM&CR. 

While pricing is not dictated by the new rules – and Howard stressed that Consumer Duty is not about stopping advisers charging fees, adding that the regulator had been ‘quite vocal’ about this – complex fee structures are not likely to be consistent with the Duty, and advisers must ensure the total price paid by clients is ‘reasonable given the product and service provided’.  

Howard continued:

“It's clear that if you've got complex or opaque pricing structures, or it's not clear for a customer to understand what the charges for your firm are going to be, then that won't be consistent with the Duty. It's up to individual firms out there to determine that the total price paid by a customer is reasonable, given the products and services being provided and the service that's going to be received by the customer. So when you look at the way you apply charges, you might start to think about decency levels, or capping fee levels in the future, to encourage consistency across your businesses.” 

Howard also reiterated that product value, as much as price, is important, citing the example of additional risk cover on a protection policy and noting that advisers should assess the reasonable probability of the consumer using or claiming on that cover. 

Using the example of home insurance protection, he added: 

“The example that I've talked about for last six months is home insurance protection. Is there a reasonable probability of ever consumer being able to claim bicycle insurance [as an add-on]? You know, how often do we see bicycle insurance on general insurance? Does the client even own a bike? You know, it's as simple as that - matching in the product to the client's needs, objectives and circumstances."

Howard ended the session by noting that for many advisers, the fundamentals of Consumer Duty were already well-embedded in their business thanks to the previous regulatory principle of treating customers fairly and that this should ‘put minds at rest’. 

He concluded: 

“At the end of the day, that's what the FCA are looking for - customers to be looked after and to be treated fairly. ‘Treating customers fairly’ might have gone as a principle, but TCF runs right the way through Consumer Duty.” 

Mortgage Adviser Event takes place in Glasgow, London and Manchester each year – advisers can pre-register for the London event taking place in May here.