Fulfilling your Consumer Duties - four things you need to know

9 August 2022
The new rules and guidance have now been published but one in five advisers say they haven't heard of the Consumer Duty. How ready is the industry for what's ahead?

The industry has less than 12 months until the new Consumer Duty comes into force. Our Head of Intermediary Development and Technical, Clare Moffat, explains what the changes will mean for protection advisers, what steps they can take to prepare and how clients and their families will benefit from the new regulations.

1. What will the Consumer Duty mean for protection advisers?

When we asked advisers - 55% said they expect to have to make changes to their business practices.*

Sitting at the heart of the Duty is the new Consumer Principle, which will move the bar from 'treating customers fairly' to acting to deliver good outcomes for clients.

This means business of all sizes must act in good faith and avoid foreseeable harm, while enabling and supporting customers to pursue their financial objectives. 

More compliance often feels tough and taxing but it does mean more protection for customers so can only benefit our industry.

2. How can advisers prepare for the Consumer Duty?

Protection advisers should start by mapping out the various stages of the mortgage protection journey through a consumer lens. How do you communicate with prospects and customers? Think about your firm’s compliance monitoring frameworks. And about the products you currently sell – do they offer fair value?

What about data and documentation? What do you have now and what will you need in the future? Evidence is important – it’s not just about doing the right things for consumers but being able to clearly show what and why something is being done. 

Firms will need to monitor, identify, and review outcomes, and they will have to understand the ‘why’ behind these outcomes. And they’ll need to have processes in place to adapt and change products, services, policies and practice.

Finally, advisers will need to think about signposting. They should make a client aware they’ll cover protection or signpost clients to a protection specialist to provide access to services like will writing or tax advice.

3. How will the new regulations benefit clients and their families?

We hope to see greater financial resilience across society and fewer complaints about poor value and products that don’t meet the needs of the client.

There needs to be robust conversations about probability and protection. These conversations should include discussions about the benefits of multi-benefit plans, which can include critical illness, income protection or family income benefit payment to protect clients against their biggest risks. Conversations could also look at putting plans in trust to help achieve better outcomes.

4. How to fulfil your duty when clients are cutting their spending?

Advisers can highlight the consequences of not having protection in place. For example, Statutory Sick Pay (SSP) is only £99.35 a week. ** Is this enough to maintain their standard
of living?

Providers need to ensure they offer tools and resources to support these conversations.
Royal London has a personalised risk report and value of menu tool to help show the need for protection and how a plan can be tailored to meet varying budgets.

And remind clients of the different benefits that provide additional value. Royal London’s Critical Illness Cover includes several additional conditions, and our Income Protection includes back to work payments, fracture cover and hospitalisation payments.

If clients decide that they need protection but they just can’t afford it, we expect the new rules will require advisers to document this fact to fulfil the requirements of the Consumer Duty.

If you’d like more help with getting ready for the Consumer Duty you can download our quick guide and watch our on demand webinar. And if you want to know what advisers are saying about the Consumer Duty, read our research report.

*Counting down to the Consumer Duty, Royal London, May 2022
** Gov.uk, July 2022

About the author

Clare Moffat

Head of the Intermediary Development & Technical Team

Clare qualified as a lawyer and Notary Public in September 2002 and is a member of the Law Society of Scotland and the Society of Trust and Estate Practitioners. Post qualification Clare spent five years at Aegon Scottish Equitable in the legal department before moving to Pinsent Masons LLP in November 2007. While at Pinsent Masons, Clare acted for many different pension providers before moving to Prudential for over six years and ended up leading the pensions side of the external facing technical team. Clare joined Royal London in April 2018 and leads a team of eight specialists as well as presenting, writing articles and commenting for the press and developing adviser facing content. Clare is a mum of 3 and enjoys holidays, running and socialising.

This website is intended for financial advisers only and shouldn't be relied upon by any other person. If you are not an adviser please visit royallondon.com.

The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The firm is on the Financial Services Register, registration number 117672. It provides life assurance and pensions. Registered in England and Wales number 99064. Registered office: 55 Gracechurch Street, London, EC3V 0RL.