Consumer Duty: getting what you need from your investment provider

Consumer Duty (“the Duty”) is here. Its deadlines are fast approaching and its scope is wide (the Duty applies “to all firms in the distribution chain for products and services sold to customers”). The key overarching themes are a need for affected parties – and anyone they outsource to – to be able to demonstrate robust audit trails and strong operational resilience. In the remainder of this note we discuss this further and highlight how our portfolios are Consumer Duty ready!

As a reminder

The Duty builds on a number of regulations already in place (e.g. TCF)  but sets a higher and clear standards of consumer protection across financial services. The Duty’s Consumer Principle is “Act to deliver good outcomes for retail customers”. The remainder of the Duty, including its three cost cutting rules and its four outcomes (all shown on chart here) focus on how parties can work towards achieving the Principle.

Key dates include: 31 October: Firms should have agreed implementation plans in place and 31 July 2023: The Duty should be implemented for new or existing products or services.

So what does it mean for Advisers?

Given it builds on existing regulations, those impacted by the Duty should already be in a strong position for adhering to its demands; that said, there is undoubtably considerable information that firms will need to collate within a relatively short period of time to evidence their adherence to the Duty. Importantly, the guidance also makes it clear that firms must consider the impact that any outsourced  services have on their customers’ outcomes and firms must have confidence in the outsourced parties’ investment processes and operational resilience.

In terms of outsourced investment management (e.g., model portfolios), Advisers should expect stringent investment rigour from their investment provider and regular transparent updates, that could be shown to the Regulator in the future if required. This should include evidence that processes are being followed and the primary focus is on enhancing retail Customer outcomes.

In this document we set out further information on how we are working with our clients to give them the comfort and information they need.