Consumer Duty will mark new era of continuously changing advice

It’s so tempting to be sucked into the general election campaign at the moment, and to write about what is – or perhaps more pertinently, what isn't – being said about the housing and mortgage markets.

The Starmer versus Sunak debate earlier this month touched a little on our market, notably talking about improving homeowning prospects for the younger generation, mentioning building targets – Labour say they will build one-and-a-half million new affordable homes over the next Parliament – but, quelle surprise, prior to the manifestos being published, there was very little detail on how this was going to be achieved. 

Now we have seen those details, perhaps we should all be focused more on what else is coming over the horizon in the next couple of months; notably, the latest UK inflation data figures will be published on the 19 June and the Monetary Policy Committee (MPC) will meet the day after.

No sudden movements until election passes 

It’s somewhat interesting, and perhaps frustrating in equal measure, that we have been talking about a fall in the Bank Base Rate (BBR) since the end of last year, and yet almost halfway through 2024, we appear to still be some months from it.

Indeed, if, as looks likely, the MPC does not vote to cut this month, then we’re looking at August or September at the earliest. As we know, there is plenty that can happen between now and then, particularly given inflation is forecast to go back up in the second half of the year.

My own view is it would be surprising to see the MPC cut rates during a general election campaign – not least because of the political fire this might well set – and the bank, and its members, might opt for a ‘quiet life’, preferring to put off any such action until a new government is in power. 

Which leads us to the 4 July, when voting takes place, 5 July when we presumably will know who is going to form the government – unless we have a 2010/2017 repeat – after which we’ll see plenty of political activity, at least until the summer recess is called. 

So, in lieu of certainty across many of those events mentioned above, what we can be certain of as an industry is that the first anniversary of the Consumer Duty rules being introduced is going to take place on the 31 July this year. 

The months have flown by but it feels like something of a pivotal point for the sector, not least because we would anticipate to hear from the Financial Conduct Authority (FCA) about how the duty has landed, how firms have approached it and met its needs and requirements, and whether it has been successful in its overall approach to delivering more positive consumer outcomes. 

Consumer Duty will bring new battleground for advisers 

What I think can be taken from all the focus on Consumer Duty is the shift it has clearly generated for both individual advisers and firms who might previously have been content to ‘stay in a lane’ when it comes to their delivery of advice.

That approach feels increasingly difficult to justify, quite simply because of the expectation that now comes with Consumer Duty that advisers are required to look at more client wants and needs, regardless of whether the individual has merely engaged with them about mortgage advice. 

We see it certainly with protection and other insurance needs, for example, in terms of being able to justify why there was, at the very least, no discussion about protection, but we also see it in a wider sense, in terms of ascertaining whether clients, for example, may be suitable for products previously unconsidered or unattainable for them. 

So, we might find this for example in the blurring of mainstream into later life, with providers offering products for those over the age of 50 in this space, which were previously not available, plus of course the growing number of product options for the over-55s.

That feels like a new ‘battleground’ or rather opportunity for advisers, especially when you have the latest UK Finance data telling us a fifth of first-time buyers are taking out mortgages with terms beyond 35 years. It won’t take a genius to work out this means more borrowers will be taking mortgage debt into later life, and this will need to be understood by advisers and they’ll need to be cognisant of the different product options available at that point.

An ongoing process 

Overall, therefore – and this could be made much more explicit in any future Consumer Duty stage, which I can’t believe we’re not going to see at some point – advisers should probably anticipate the regulator wanting to see growing product and service coverage from advisers, particularly as mortgage advisers may be the only advice a large number of the public will see or use at any point during their lifetimes. 

Or you’re going to need to justify explicitly why those discussions didn’t take place, and why the customer as a result might not have come away with the most suitable and positive outcome for them.

One year on from its launch, it doesn’t feel like the regulator is simply going to be happy with what it delivered to market or allow firms to rest on what they have achieved. 

Continuous progression is likely to be an ongoing requirement, and it therefore pays to remain engaged and to keep on looking for the ways and means to improve your offering to deliver what will be required going forward.