Consumer Duty - Beyond regulatory change


Jill Henderson

Jill Henderson

Head of Business Development.

Consumer Duty goes beyond regulatory change and will go a long way in enhancing member outcomes.

Consumer Duty is a new and higher standard of consumer protection that has been introduced by the Financial Conduct Authority (FCA).1 It will be one of the most significant regulatory changes to influence the pensions industry in this decade. It aims to ensure that the finance industry has a clearer focus on customer outcomes and protecting customers from harm. The new regulation comes into effect in July 2023 for products available on or after this date, or in July 2024 for closed products.1

What does the consumer duty mean for advisers?

Through Consumer Duty, the FCA advise that we must give the interests of our members the same weight that we give our commercial activities.1 Although many in the industry may feel they’re already acting this way, the Duty carries a greater responsibility in terms of how firms evidence their increased focus on consumer outcomes.

Consumer Duty goes beyond a tick-box exercise – we will all be measured against the outcomes we deliver for members. All products and services need to be fit for purpose and designed to meet the needs of consumers.1 Advisers need to regularly review all the products and services distributed to ensure they are appropriate. Product suppliers and advisers will also be expected to work more closely together to share relevant information to support compliance with Consumer Duty.

Under the Consumer Duty, it’s imperative to evidence the good outcomes that organisations claim to deliver for customers. This is because the FCA want all consumers to receive fair value, with value referring to the overall benefit a consumer receives from a product, not just the price paid for it.

Adviser assessment of their own charges and representation of fair value for their clients, should be included in an overall assessment of value based on the total cost to the consumer. This includes all the various product, advice, and platform charges.

As advisers have both the clearest oversight of their client’s position and the value of the total proposition, the fair value assessment therefore needs to go beyond advice charges to consider the overall cost to the client, including all charges in the distribution chain.

Ongoing support that meets consumers’ needs over time is also key for consumers to realise the benefits of the products and services they have.1 Advisers must also be mindful of their clients’ changing needs and the impact of economic and social factors like the rising cost of living. The advice world is also expected to assess their own as well as provider support standards and deliver flexible support models that meet the needs of their clients, including those with characteristics of vulnerability.

And when it comes to communication, consumers must be able to make informed decisions by having the information they need, at the right time, presented in a way they can understand. Therefore, we all have a duty to ensure we communicate with clients at relevant points, and when there is an opportunity to help clients, to act in their best interests.

Scottish Widows support

While the Consumer Duty will bring change, it will also bring opportunity for organisations to improve to benefit customers. At Scottish Widows, we support Consumer Duty and the increased momentum it’s given us to continue our work to deliver great outcomes for members.

We start from a position of strength, with the activity we are undertaking being in the spirit of Consumer Duty to further optimise member outcomes. For example, we are reviewing how we communicate during key moments of truth like the at-retirement stage. We’re also improving our onboarding experience for members by starting to review and roll out changes to our welcome packs.

Our customer-centric mindset across the business means we are committed to meeting our members’ needs. We’ll ensure a specific Consumer Duty lens is applied to this mindset, and that the application of Consumer Duty principles are embedded across the business. The pensions industry is well acquainted with the principle of fair value for members, but Consumer Duty increases that focus even more across the distribution chain. In accordance with this, we have provided access to summarise fair value assessments for each of our in-scope products. These can be found on our new product governance page.

Consumer Duty goes beyond regulatory change and substantially drives better outcomes for consumers, and we welcome the positive impact it will bring for retirement savers across the UK. As consumers face challenging financial circumstances and potential implications on their ability to save, it's increasingly important that they can access expert advice to help navigate these conditions.


Notes to Editor

[1] According to FCA, 2022/2023 Consumer Duty.



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