UK retail financial services faces massive overhaul: new consumer duty to transform industry

UK Retail Financial Services to Undergo Major Overhaul

The UK retail financial services industry is set to undergo its biggest overhaul in two decades with the introduction of a new consumer duty. The Financial Conduct Authority (FCA) will now require firms to justify charges to customers, focusing on delivering "good outcomes" and preventing harm. This includes ensuring that fees and charges are based on value and that products have value to customers. Firms that fail to comply may face action from the FCA, such as price adjustments or product changes. The new duty aims to improve trust in financial services and prevent mis-selling scandals. It is estimated that implementing the duty will cost firms £2.4 billion. Already, wealth manager St James's Place has changed its fee structure in response. However, there is uncertainty surrounding how the duty will be interpreted and enforced by the FCA.

Impact and Concerns Surrounding the Consumer Duty

The new consumer duty is already having an impact on the industry. Wealth manager St James's Place has adjusted its fee structure in response to the new requirements. However, there is uncertainty about how the FCA will interpret and enforce the duty. This uncertainty coincides with concerns over "debanking" and the need for improved customer service. The consumer duty is expected to lead to easier-to-understand terms and conditions, better savings rates, and tailored support for mortgage customers facing financial difficulties.

Ensuring Value and Fair Pricing for Customers

The aim of the consumer duty is to ensure that customers receive value for money and fair pricing across financial products and services. The duty seeks to improve trust in the industry and prevent mis-selling scandals. It is estimated that implementing the duty will cost firms £2.4 billion. The new regime is expected to result in easier-to-understand terms and conditions, better savings rates, and tailored support for mortgage customers in financial difficulty. Overall, the consumer duty represents a significant overhaul of the UK retail financial services industry, with the goal of providing customers with better outcomes and preventing harm.