Don’t get caught on the back foot!
The FCA’s recent thematic review, albeit focused on General Insurance and pure protection, is a clear signal of what could be coming next. Following the introduction of Consumer Duty in July 2023, we’re now seeing how the FCA is beginning to assess whether firms are truly living up to the regulatory expectations. And the early signs? There’s a lot of work to be done.
On the face of it, this paper focuses on the potential shortcomings in processes and oversight for both manufacturers and distributors when delivering good client outcomes. However, if you dig deeper, the implications could stretch far beyond these market areas.
When the regulator says, “we are very disappointed to see many firms failing to meet their regulatory obligations”, it’s not just a warning to the protection sector. It is potentially a broader signal that other, more complex, product and advice areas could be next.
If your firm is involved in a distribution chain, now is the time to ask yourself: are we doing enough?
The FCA Is Ready to Act
The review makes it clear that the FCA isn’t just observing from the side-lines, they’re taking action. The statement, “Where we have more material concerns about product value, we are intervening – including getting firms to withdraw products from the market”, sets the tone. If significant customer harm is identified, firms and their senior managers will be held accountable, with customer redress expected.
Having worked with several distributors and manufacturers across a broad range of advice and product areas, we’ve seen there are firms that have already worked hard on their controls and oversight, but the FCA’s findings suggests there is still more to be done. For many businesses, this represents a pivotal moment to reassess whether the current measures are sufficient to really ensure fair value and deliver good client outcomes.
The Importance of Thorough Scrutiny
This is a real opportunity to deliver long term change in the industry – an obvious Consumer Duty expectation. Simply accepting information from a manufacturer without sufficient scrutiny may not satisfy regulatory obligations. The reality is that many documents lack the granular assessment needed to ensure that products are genuinely delivering value to customers and being distributed to the right clients. Distributors need to understand, or be prepared to challenge, the information provided, or risk falling short in their duties.
The final Consumer Duty paper made it very clear: if a product or service is recommended to a client for whom it wasn’t designed, it’s unlikely that a good outcome will be achieved. In other words, every party in the distribution chain needs to be actively driving meaningful change – not just to comply with the regulations, but to ensure that clients are receiving the right products for their needs. Good for clients, good for the industry and ultimately, good business.
Disappointingly, this thematic review suggests the regulator is less than impressed with the evidence seen so far across both manufacturers and distributors, on both target market statements and fair value assessments.
A Broader Call to Action
The FCA’s thematic review is a call to action. Manufacturers and distributors alike need to provide more evidence of how fair value and good outcomes are being delivered to clients. More importantly, they need to ensure that appropriate oversight (especially MI) is in place to back it up.
While the review focuses on General Insurance and pure protection, nobody should be surprised to see similar reviews of more complex or higher-risk advice areas – where the potential for client harm is greater and the scrutiny from the FCA is likely to be more intense.
If you haven’t read this paper, I’d encourage you to do so. It’s not just about staying compliant today – it’s about future-proofing your business for the challenges that lie ahead, so don’t wait until you’re on the back foot. Now is the time to make sure your firm’s processes align with Consumer Duty expectations.
If you have read it and are wondering whether your current processes and oversight are up to scratch, maybe it’s time to consider an external review. At Adeptli, we work with firms across a wide range of product and advice areas, to ensure their practices and materials meet the FCA’s expectations under Consumer Duty.
Reach out to us today by emailing hello@adeptli.co.uk or booking in an introductory meeting, and let’s make sure your business is on the right track for delivering long-term value and positive outcomes for your clients.
Up Next: Why not read our article on The FCA’s New AI Lab and What You Should Be Thinking About.