Article by Phil
The FCA has now published its guidelines for financial services firms who will be required to complied with a new set of Consumer Duty requirements by July 2023. The new requirements are intended to add to the existing Treating Customers Fairly (TCF) rules and improve customers experience of dealing with financial services companies.
There are a number of elements to the new Consumer Duty requirements, but one relates specifically to wealth management exit fees. These have always been contentious. Charging customers to withdraw or move their own money out of or between funds. This practice has been operated by a number of wealth management companies for years.
Never by us I might add.
The new Consumer Duty requires firms to prevent causing customers harm by charging unreasonable wealth mangement exit fees and also to prevent delays in allowing customers to withdraw funds, which often causes distress. If exit fees are still charged, they should be proportionate to the costs incurred by the firms for processing the withdrawals or transfers. I imagine that means that wealth management exit fees of up to 2% of fund values would be viewed as disproportionate. This is certainly a good thing for customers. It will be interesting to see how the wealth management companies react and adapt their charges. Especially as the FCA will require firms to clearly draw a customer’s attention to any extra fees above and beyond the initial charges.
The FCA stopped short of banning exit fees, however.
Other changes included in the new Consumer Duty include:
- Ensuring that there is regular communication with customers and that their changing circumstances are always taken into account. We do this already through our regular review meetings.
- Ensuring that communications with customers are appropriate and effective for the customer. For example, we already use e mail, letters and online access through our Portal to communicate with our clients.
- Assessing customers’ needs in terms of their potential vulnerability. Something we already do for every customer, adapting our approach accordingly.
- Providing customers with simplified information about complex products by way of summary documents. Something we introduced for pension transfers last year.
There is no doubt that the Consumer Duty will benefit customers and make financial services firms improve the way that they interact with them. This will be good for us as well and might signal the end of the two hour wait for providers to answer their phones. Or the months of delays in sending information and paperwork.
Let’s hope so.
