Bringing you live news and features since 2006 

PIMFA calls for new FCA Consumer Duty to be accompanied with clarity for firms

RELATED TOPICS​

PIMFA, the trade association for wealth management, investment services and the investment and financial advice industry, has welcomed the introduction of a new Consumer Duty by the Financial Conduct Authority (FCA) but says that the new duty must be accompanied with greater clarity over any new regulatory expectations placed on firms and a reasonable assessment of firms’ ability to discharge their obligations under the duty.

While PIMFA supports the FCA’s desire to address the harms the Consumer Duty is intended to tackle, it is unclear to us why the FCA feels it requires new powers when it already has many powers at its disposal.
PIMFA is particularly concerned that the new duty could lead to a situation in which the Financial Ombudsman regulates in hindsight with firms falling foul of elements of a duty they didn’t know existed. Ultimately, this will lead to firms trying to second guess how the regulations should be applied unless they are given quite clear and specific guidance, driving up costs for some firms or leading to regulatory failure for others.
PIMFA is also urging the Regulator to give due consideration to the broader regulatory architecture and how its proposals may interfere inadvertently with business models – specifically in the Execution Only market. Previous work linked to the Financial Advice Market Review concluded that almost any recommendation with any degree of personalisation crossed the boundary. This would create a tension between what services firms have permissions for and are willing to provide, and the execution of a consumer duty.
Liz Field, Chief Executive of PIMFA, says: “We share the desire of the Regulator to eliminate many of the harms which it identifies in its Consumer Duty consultation. However, it is yet to clarify why it needs new powers to address these harms rather than use the ones that it already has.
“The very real risk that we see in these proposals introduce a higher level of expectation on firms, without providing the necessary clarity, granularity and guidance, which underpin the FCA’s proposals for a Consumer Duty.
“In doing so, they increase the chances of regulatory failure for firms which are currently unwilling, or unable, to meet their obligations, and place increased cost and administrative burdens on firms which do.  
“This is indicative of a long-standing criticism we have of the Regulator. When harm occurs in the market, it seeks to introduce new rules rather than understand whether or not the rules already in place could be enforced better and be accompanied by fit for purpose supervision.
“In giving due consideration to a consumer’s best interests, we are particularly concerned that under Consumer Duty proposals, firms will now be required to provide recommendations and services to people with a degree of personalisation. This runs a significant risk of forcing firms to cross into giving a form of advice which would in turn, create a tension between what services firms have permissions for, and are willing to provide, and the execution of a consumer duty.”
 

Latest News

BlackRock’s global ETP flows report for June finds a steady rise with USD128.1 billion added to global ETPs in June,..
Morningstar’s global ETF flows report for the first half of 2024 shows that actively managed ETFs have captured 25 per..
The surge in bitcoin ETF launches and funds flowing into the sector is transforming institutional investment in digital assets but..
LSEG Lipper’s latest research finds that the majority of actively managed funds and ETFs globally were not able to beat..

Related Articles

Chris Lo, Columbia Threadneedle
In a recent insight on India by Columbia Threadneedle Investments, the firm reports that the country’s economic reforms, which aim...
With an election on the horizon in the United States a group of ETFs is poised to capture investments on...
Robot worker
Qraft Technologies, based in South Korea, specialises in the use of AI in security selection and portfolio construction....
Andrea Busi, Directa SIM
Romain Thomas talks to Andrea Busi (pictured), CEO of Directa SIM, who explains why the online trading platform has just...
Subscribe to the ETF Express newsletter

Subscribe for access to our weekly newsletter, newsletter archive, updates on the site and exclusive email content.

Marketing by