FCA cracks the whip on consumer duty

The Financial Conduct Authority is set to quiz financial advisers over whether they are properly following the new Consumer Duty regulations, after hearing that some may be overcharging customers.

Around 20 of the largest advice firms are receiving a survey from the regulator, but the FCA stressed that their selection had not been based on any “particular concern with those firms”, but instead to allow it to receive “the widest possible understanding of market practice”.

Consumer Duty came into force last July, with experts describing it as the most important regulatory change in a decade, pushing financial advisers to not overcharge their customers.

The FCA has repeatedly raised concerns that clients were still being charged fees for services that they were not receiving.

In a webinar at the end of last year, the regulator said it was worried that companies may be charging consumers for services without providing it to them, such as an annual review.

“We’re seeing too many firms providing a service which the client doesn’t actually need,” Kate Tuckley, head of consumer investments at the FCA, said in the webinar.

The watchdog said that it would be asking if firms have assessed their ongoing services in response to the new rules, and if they had made any changes as a result.

In addition, it will ask firms to hand over data on the number of clients due for a review of the ongoing suitability of their advice, as well as how many actually received a review and how many received refunds for any benefits that did not happen.

The FCA said it was quizzing the firms to figure out whether it needed to make any changes to its regulation, adding that it anticipated providing a further update after the firms respond.

The watchdog had indicated that it would be pressing firms in a letter sent out in December 2022, setting out its concerns that firms were not taking the incoming regulations seriously enough.