The consumer duty – another important step along the road.

There is already an instrument in place that determines value for money – it is called the free market.

If a client feels they are not getting value for the product or service they are paying for, they go somewhere else – simple- Dr D (comment to “FCA delays consumer duty…”).

I enjoyed the elegance of Dr D’s post but wonder at the mindset that produced it. That mindset’s founded in solipsism, it can only see things from its own perspective, it cannot acknowledge other mindsets other than its own!

To understand the need for regulation (and for the Consumer Duty) we need to step outside our own mindset and consider those of others, and we need to see that what worked yesterday may not work today and almost certainly will need changing tomorrow.

I started work in a world where financial services really were “self-regulating”.

Critics of the FCA should be reminded of the world before we had meaningful financial regulation , a world I worked in for four years before the 27th February 1988 (A-Day).

That world was so terrifying that I still worry about my behaviour and those I worked with, today.

Left to its own devices, the financial services industry would not operate a consumer duty but would set out to maximise shareholder value at the consumer’s expense. And where nothing was ring-fenced as good, the consumer would typically find themselves in “bad”. It is worth remembering that until it blew up, Equitable Life was the benchmark for good in terms of retirement and endowment savings. The bar was that low.

Critics of the FCA should also consider the improvements for the consumer in terms of transparency and protections against fraud, the proper regulation of product through stakeholder to the workplace pensions of today. They should recognise the improvements in the value of advice resulting from the RDR and the genuine advances resulting from the introduction of IGCs and GAAs. Regulation has massively improved consumer protection for those consumers who don’t have the time, energy, wit and experience to navigate the financial system for themselves.

As regards value for money, how can the consumer have any conception of “good” if there is no benchmark that separates good from bad? The Consumer Duty is partly about setting in place more generally , a process that has been started in IGCs of understanding and reporting on value for money. By getting that formulation into popular coinage, the FCA will be making consumers aware that they have got the right to vote with their feet, but that will not happen without intervention. That’s why we have the FCA and that’s why we have to have the lengthy extension to the rulebook which was published yesterday.

Just when these rules come into force is relatively unimportant, the onus is already on financial services providers from the behemoths to the one person bands, to think of the customer first.

And the fact that the rules for the new consumer duty are now published  is enough to increase the momentum for positive change.

This is not a culmination but a continuation of a process that started in 1986 with the Financial Services Act. The FCA calls it a major shift, it is a hefty nudge to speed up a process that has been happening ever since.

As the image at the top of this blog suggests, it will be technology that will drive this iteration, shared data that will ensure firms comply. This is an iteration for Britain as we approach the end of the first quarter of this century.

No doubt there will be further iterations of consumer protection in the decades to come, for the world will not look much like it does today in another 36 years time!

So Dr D, elegant as your post is, it is a facile statement that suggests that we are all as financially aware as you. If we were, there would be no need for you, which I am sure you would not count as “success”!

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
This entry was posted in pensions and tagged , , , . Bookmark the permalink.

1 Response to The consumer duty – another important step along the road.

  1. “Left to its own devices, the financial services industry would not operate a consumer duty but would set out to maximise shareholder value at the consumer’s expense.” I’d add that some, fortunately fewer than there used to be, still put a lot of effort and ingenuity into evading the duties that have been put in place. That includes those who adhere to the letter not the spirit.

Leave a Reply