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How consumer duty helps you

Chief executive of Worldwide Financial Planning, Peter McGahan says firms "need to" deliver good outcomes for customers

Peter McGahan, chief executive of Worldwide Financial Planning(Image: © Richard Trainor)

For the last 35 years, I have watched the many changes to how the regulators sought to ensure customers received good value. Much has changed for the better, with other aspects still behind.

In July, ‘Consumer Duty’ came into action, with financial firms having to prove they are doing what they need to deliver good outcomes for customers on products and services, price and value, consumer understanding and consumer support. Firms need to end rip off charges and fees and make it simple to cancel or switch products where a customer is disadvantaged.

I’m puzzled by how that will apply, because how do customers know? They wouldn’t knowingly enter a poor charging plan, would they? But they do.

When the superwoman of finance, Helena Morrissey joined St James’s Place, she told the Telegraph newspaper that she would struggle to explain the firm’s charging structure. She went on to say that she hadn’t met anyone who could completely articulate how the charges worked in a sentence. When she left 14 months later, it was reported that she still didn’t understand it.

Consumer Duty lays it on the table that customers need clarity but remember that transparency and clarity are very different. If the superwoman of finance couldn’t explain after over a year, what chance does a consumer have?

In the media you can read how St James’s Place have now announced it will cap annual management charges on some products where customers have been invested for more than 10 years, but the changes only come into play after 2025. This, in my opinion, doesn’t match the consumer duty spirit, and should come into play immediately.

St James’s Place doesn’t offer independent advice and is restricted, therefore the benefits available of lower charges and the better fund performance aren’t available to them. Similarly, there are products available to customers via an Independent Financial Adviser and the whole market that just won’t be available to a St James’s Place adviser.

You may remember my analysis on two ‘structured guaranteed deposit plans’ last month. There is absolutely no chance any financial adviser could explain those charges to a customer, and that customer be able to walk away and articulate them.