TMA Club has outlined the most common questions its Broker Support Desk have assisted Directly Authorised (DA) brokers with ahead of the upcoming Consumer Duty deadline in July.
The most frequently asked questions have related to: The scope of Consumer Duty, vocabulary used by the FCA, and considerations that firms should prioritise.
The scope of Consumer Duty: TMA Club has seen a sustained focus on queries relating to who, and what, the FCA’s new guidelines will apply to. In particular, brokers have been keen to understand whether Consumer Duty will apply to all the products and services that they sell. The guidelines apply to all regulated products except group policies (e.g. group life or group private medical policies). For example, it wouldn’t apply to an unregulated investment BTL mortgage, but it would apply to a consumer buy-to-let mortgage.
Other brokers have been enquiring if Consumer Duty applies to them, even when they don’t offer advice. TMA says the guidelines still apply in this instance, but the brokers in question must ensure that all the information they give to a customer is clear & in plain English. By doing so, they ensure they understand exactly what they’re being offered and make an effective and informed decision.
Clarification of vocabulary used in the guidelines: There are three main questions asked by brokers when it comes to terminology in the guidelines, which are as follows:
- Fair value: Fair value is the relationship between the price the customer pays and the service/ product they get. The price must be “reasonable”. For example, generally charging for 5 hours work, when you know it’s only going to take 2 hours wouldn’t be ‘fair value’. An important clarification is that low prices don’t necessarily mean fair value.
- Customer support: The FCA gives standard examples demonstrating customer support in terms of accepting complaints, providing ongoing dialogue about understanding, and making claims. However, brokers must also consider what additional support they need to provide customers with vulnerable characteristics. In these cases, firms need to consider a consolidated recommendation, and what support customers might need from providers/ lenders as well as themselves.
- Manufacturer: Brokers are manufacturers if they charge a fee for mortgage or insurance broking, but they are not the same type as a lender or product provider. They are a manufacturer for the service only, and therefore do not have to consider things such as the fair value of their product, just their service.
Considerations that brokers should prioritise: TMA says the priority for brokers is assessing what they currently do, and how they need to change to meet the four customer outcomes: Products and services, price and value, consumer understanding and customer support. However, they should also consider the three cross cutting rules as well as the new conduct rule that will apply to firms and their staff/advisers. Consumer Duty rules now also take account of how firms support customers with vulnerable characteristics. Firms should be able to identify which customers are vulnerable, and what actions they have taken to support them – as well as those who are not. Full explanations and expectations are shown in the various sections in non-Handbook Guidance.
Lisa Martin, development director at TMA Club, said: “With the Consumer Duty deadline fast approaching for advisers, brokers across the board are working hard to make sure they will be able to meet the requirements laid out in the guidelines. TMA Club is committed to ensuring our broker members understand, and adapt to the FCA’s regulations – something which will ultimately help the end-consumer.
“Particularly in a market where independent advice is more important than ever, TMA Club is providing crucial compliance support to advisers, who in turn can spend more time helping their customers navigate this complex environment.”
