Using financial services and products is something we all have to do as part of adult life, and it’s imperative that we’re able to trust the companies that deliver them. In some sectors, poor design and delivery of products is a nuisance, but when it comes to financial services, the consequences can be much more devastating. It’s for this reason that the Financial Conduct Authority (FCA), the primary regulatory body for financial services in the UK, has been of increasing importance over recent years.
Although the FCA has provided rules and regulations for the financial services industry since its inception, the new Consumer Duty offers a more flexible and principles-based approach than the previous regulatory framework. This is intended to give firms more freedom to innovate while ensuring that they meet the needs of their customers. In this guide, we’ll explain what the Consumer Duty is, and how it benefits customers and firms.
What is the Consumer Duty?
The Consumer Duty is a set of minimum standards for mortgage brokers (and other financial services firms) in the UK to abide by. These standards were created by the FCA in 2021 and officially came into effect on the 31st of July 2023. Since then, all mortgage brokers and financial institutions in the UK should have implemented the duty and may have to prove they are doing so to the FCA.
The Consumer Duty sets out the following three key expectations for mortgage and insurance advisors in the UK:
- Mortgage and insurance advisors must take reasonable steps to avoid causing foreseeable harm to customers. This means we must consider the risks to our customers when designing, selling and delivering our services. We also need to put in place systems and controls to mitigate any risks.
- Mortgage and insurance advisors must take all reasonable steps to enable customers to pursue their financial objectives. This means that we need to understand our customers’ needs and goals, and provide products and services that are likely to help them achieve those goals.
- Mortgage and insurance advisors must always act in good faith. This means that we have to be honest and transparent with our customers, and treat them fairly at all times.
How Will the Consumer Duty Benefit Customers?
The main aim of the FCA is to protect consumers of the financial services industry, and the Consumer Duty is their most recently updated framework to ensure this happens.
Here are some of the key benefits of the Consumer Duty for customers:
- Unbiased information and advice. The Consumer Duty should ensure that customers receive clear, concise, timely and accurate information about the products and services they’re offered, so they can make a balanced decision based on accurate information.
- Easier to switch providers. In general, the Consumer Duty should make it easier for customers to switch providers, as firms will be required to make it clear how to do so and when it is most appropriate.
- Better protection against unsuitable products and services. The Consumer Duty is designed to prevent firms from selling unsuitable products and services to customers and to prevent foreseeable harm of any sort.
- Greater understanding of the risks. Advisors will have a duty to ensure customers fully understand the risks and implications involved with taking out particular financial products or services.
- Better financial protection in general. Leading on from the previous two points regarding the prevention of foreseeable harm and understanding risks, homeowners will be better advised on how to protect their mortgage with the right insurance policy.
- Better customer outcomes in general. Overall, all the points above should lead to better outcomes for customers both in the short and long term. The financial sector as a whole should have a greater desire to put the customer first, and individual firms should have a renewed focus on treating customers fairly and with respect.
To summarise, the Consumer Duty is a positive step towards better protecting consumers in the financial services market. If you have any concerns about the way you’ve been treated by a financial services firm, you can contact the FCA and they will investigate to ensure the Consumer Duty has not been breached.
How Will the Consumer Duty Benefit Companies Like Michael Usher Mortgage Services?
As we mentioned earlier, there’s nothing in the Consumer Duty that is new to us here at Michael Usher Mortgage Services. We’ve been trusted by our local community for over 30 years, and have won awards from our compliance network, HL Partnership, who are authorised and regulated by the FCA. We’ve always put our customers front and centre, and done all we can to ensure positive outcomes.
Having said that, the Consumer Duty will still be of benefit to us for the following reasons:
- Fewer low-quality firms to compete with. The introduction of the Consumer Duty will give the FCA the chance to weed out the lower quality and less ethical mortgage and protection advisors. This should encourage more customers to use respected and reputable firms, such as Michael Usher Mortgage Services.
- Added confidence in the value we provide. As part of the Consumer Duty, the FCA has to be happy that firms are offering sufficient value for money when delivering their services. Again, we’ve always been confident in the value we provide, and our 4.9 rating on both Trustpilot and Google Reviews backs this up – but having the UK’s watchdog and regulator vouching for us gives us added confidence that we’re providing good value to our customers.
- Greater impetus to protect our customers and their homes. The Consumer Duty has helped to keep our team focused on assuring positive long-term outcomes for each and every customer. For example, although we’ve always talked to our mortgage customers about the importance of protecting their loans with the right insurance, we now have a greater duty to ensure they fully understand the implications and risks if insurance isn’t taken out. This extra impetus should lead to more families and homes being properly protected.
The Bottom Line
The UK’s independent financial regulatory body, the Financial Conduct Authority, has created a new regulatory framework called the Consumer Duty. The Consumer Duty was introduced in 2021 and officially came into effect on the 31st of July 2023. The main aim of the Duty is to protect customers whilst giving firms enough freedom to innovate. The Consumer Duty should give customers more confidence in the financial services they use. This is because firms now have a greater duty to protect customers and ensure positive outcomes, and the FCA will be monitoring companies to ensure they are abiding by the new standards.
We welcome the Consumer Duty here at Michael Usher Mortgage Services. As one of the most respected and trusted mortgage firms in the South of England, we’ve been abiding by these standards for over 30 years! If you’re looking to get a mortgage or remortgage, we can help you. We offer a comprehensive range of products from across the market, including specialist deals that aren’t available directly from lenders. Let us find a deal that suits your needs, guide you through the process, and liaise with your lender, estate agent and solicitor to ensure your application goes smoothly. We can also help to protect your mortgage with our FREE Insurance Service.
Talk to one of our friendly mortgage advisors for free to get going quickly. Our head office is on Frimley High Street, but we can also help you remotely via phone or video call if you’d prefer. We look forward to chatting with you!
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