Consumer Duty: FCA Portfolio and Sector-specific Letters

On 8 November 2023, the FCA published a Dear CEO letter to wealth management and stockbroking firms (read our summary). Specifically the letter is intended for firms that typically manage portfolios or provide retail focused stockbroking services or operate as a private bank or provide outsourced services to wealth managers.

This is the first Dear CEO letter following the implementation of the Consumer Duty and signals the FCA’s intention to use the Consumer Duty to intervene against consumer harm.

Earlier in 2023, during the Consumer Duty implementation process, the FCA published a series of sector-specific letters to portfolio firms, setting out their expectations for Consumer Duty implementation and to give more sector-specific feedback on their findings from their review of firms’ implementation plans read our summary here.

Our initial take from the portfolio letters is that, whilst the FCA do not introduce any new requirements, they provide some helpful detail around the implementation of the Duty in the context of specific sectors, so are certainly worth a read. Particularly, some of the sector-specific examples of good (or less good) practices could be helpful for firms looking to determine what data/MI they need to collect under the Duty. We have prepared summaries of the relevant letters where indicated below.

The FCA have published letters with information on the Duty for:

• asset management, custody & fund services and alternatives (read our summary)
• retail banks and building societies (read our summary)
• claims management companies (CMCs)(read our summary)
• consumer investments (read our summary)
• contract for difference (CFD) providers (read our summary)
• credit reference agencies and providers of credit information services
• general insurance and pure protection firms
• high cost lenders
• life insurance
• mainstream consumer credit lenders (read our summary)
• mortgage lenders and administrators (read our summary)

On 21 February, the FCA published the following sector-specific letters to portfolio firms:

• debt advice firms
• debt purchasers, debt collectors and debt administrators
• payments services and e-money (read our summary)

Since then, the FCA published the following sector-specific letters to portfolio firms:

• credit brokers
• credit unions
• mortgage intermediaries
• motor finance providers
• retail finance providers
• contract for difference (CFD) providers (second portfolio letter) (read our summary)
• SIPP providers

Other Portfolio Letters

For completeness, in 2022 the FCA also published Portfolio Letters to:

• Financial Advisers and Intermediaries (FCA Portfolio letter to Financial Advisers and Intermediaries December 2022) which outlines its analysis of the risks and expectations of these firms in relation to the Duty. The FCA points to firms’ inadequate analysis of the relevance, nature and costs of services for all clients, meaning customers are not provided with adequate information regarding their investments, in breach of the outcome to ensure the service offered is appropriate for the client’s circumstances. In terms of expectations, the FCA indicates that culture is a key cause of past conduct failings. This is likely to be of particular relevance to ongoing services provided by financial advisers firms. A further communication from the FCA on the impact of the Duty on Financial Advisers and Intermediaries is expected to follow in 2023.
• High Cost Lenders (FCA Portfolio Letter: High cost lending products October 2022) setting key areas of harm and risk that those firms pose to their consumers and areas of focus on the implementation of the Duty in that industry; and
• Benchmarks Administrators (Portfolio letter: Our supervision strategy for benchmark administrators September 2022) confirming that although benchmark administration activities are not within scope of the Duty, it expects benchmark administrators to “support users of their benchmarks in meeting their obligations under the Duty, for example by making relevant information and disclosures available to them”.

Visit our Consumer Duty Feature page for more information on Consumer Duty implementation.