15/03/2023 Brokers operating in the UK will face stringent new laws
governing how they treat customers. Here’s how it might affect brokers: The Consumer Duty is
a new legal framework setting out a list of obligations and requirements for financial
services firms to govern the way they communicate and offer their products and services to
retail consumers.
- A new Consumer Principle that requires firms to act to deliver good outcomes for
retail customers. - Cross-cutting rules requiring firms to act in good faith, avoid causing foreseeable
harm, and enable and support customers to pursue their financial objectives - Four Outcomes rules requiring firms to ensure consumers receive communications they
can understand, products and services meet their needs and offer fair value, and the support
they need.
Delivering ‘good outcomes’ for retail traders is not a
straightforward concept, particularly if you are running a B Book model. Therefore, having
the right technology in place to deliver the best experience to clients will be an important
step to take in showing regulators that you are fulfilling your obligations. It’s important
to note that one of the FCA’s regulatory principles is that customers are responsible for
their own decisions. “Avoid causing foreseeable harm” was changed from “avoiding foreseeable
harm” in order to make it clear that firms are expected to take reasonable steps. Companies
are not required to ‘prevent harm’ where they have properly informed the retail customer.
The Consumer Duty is “underpinned by the concept of reasonableness”. Retail brokers have a
number of tools at their disposal to help deliver ‘good outcomes’ for their customers. For
example, charting packages and other analytics provided to the retail trader by the broker
could be considered as part of the set of measures the broker is using to ensure ‘good
outcomes’. The delivery of reliable, timely and relevant market and account information to
clients that can be customisable and in simple language would assist in brokers meeting some
of the requirements that require firms to ensure consumers “receive communications they can
understand, products and services meet their needs and offer fair value, and the support
they need”. The Consumer Duty framework places particular emphasis on vulnerability and
customers exhibiting vulnerable characteristics. Brokers are expected to have a set of
policies and procedures in place to address elements of vulnerability and provide better
support and assistance to vulnerable customers. As such automated tools, such as speech
analytics, may be key to assist firms identify customers with vulnerability characteristics
and provide them the help they need. Find out more about how technology partners can
help in supporting retail brokers with a variety of regulatory and compliance obligations
with our
downloadable
Finalto Broker Series report.