Dear Platform Bosses,
Did you do anything special to celebrate Consumer Duty implementation day on 31 July? Maybe made a few tweaks to how you handle interest on any cash customers you have?
Now, I know it’s not generally encouraged for savers to hold vast sums of money in this way, but I’m not so sure the Financial Conduct Authority will see that as a valid excuse if you haven’t done anything.
We didn’t have to wait long to see the Consumer Duty in action
The regulator certainly had plenty to say to your bank and building society cousins when the Consumer Duty went live. For the avoidance of doubt, the FCA outlined a 14-point action plan on cash savings. It wants to ensure financial institutions are passing on interest rate rises to savers appropriately.
Oh, and the regulator also highlighted it was keen to see more effective communication.
So that’s part of the premise of the Consumer Duty — better outcomes for customers. Why didn’t they just say?
Silly me. They did — even if several cries from the industry suggested there was no need to as many companies were already doing much of what was laid out in the principles-based regulation.
Dear Platform Bosses — if cash has not been a priority for you, for whatever reason, you might want to make it one
If that’s the case, there’s probably nothing to worry about. But the FCA clearly doesn’t think financial services firms overall have been doing a good enough job of putting customers first. So here we are.
‘Robust action’
The regulator’s cash savings plan followed a market review and a roundtable with banks in early July. Firms offering the lowest savings rates had until the end of August to justify how those rates gave fair value under the Consumer Duty. The FCA promised “robust action” by the end of the year against those that could not demonstrate fair value.
Platforms have had their fair share of ‘Dear CEO’ letters from the FCA. This one, from me, doesn’t have to be taken quite so seriously
If anyone had thought the regulator might just let the implementation date come and go without much fanfare, they were truly mistaken.
And we didn’t have to wait long to see the Consumer Duty in action. Here’s a snapshot.
On Monday 31 July, FCA executive director of consumers and competition Sheldon Mills said: “We want a competitive cash savings market that delivers better deals for savers, where interest rates are reviewed quickly following base rate changes and firms prompt savers to switch to accounts paying higher rates.”
He welcomed progress made so far but said it needed to “speed up”.
The FCA clearly doesn’t think financial services firms overall have been doing a good enough job of putting customers first
Thursday of that week rolled around (3 August) and the Bank of England increased the base rate. This happened to be for the 14th time in a row so we’re getting fairly used to it now.
Just hours later some providers were contacting savings customers to inform them they were upping interest rates on their accounts. How’s that for speedy?
Keeping an eye
Of course, there are differences between investment platforms and banks, but there are similarities too. And you don’t need me to tell you the FCA has had its sights on platform cash accounts several times over the years.
It will continue to keep an eye. In mid-July, 39 platform and self-invested personal pension (Sipp) firms received an interesting set of questions from the FCA. The regulator wanted to get an idea of how much of the interest such firms received through cash and bank deposits was being passed on to their customers. Or, to put it another way, how much firms had earned in interest on customers’ cash balances.
It followed hot on the heels of the meeting with the banks. Ah!
The regulator certainly had plenty to say to your bank and building society cousins when the Consumer Duty went live
Answers had to be in before Consumer Duty implementation day. If firms hadn’t already reviewed their approach in light of the incoming duty, this probably served as a pretty good warning to do so.
Platforms have had their fair share of ‘Dear CEO’ letters from the FCA. This one, from me, doesn’t have to be taken quite so seriously.
However, if platform cash has not been a priority, for whatever reason, you might want to make it one.
Yours faithfully,
Katey Pigden, editor of Money Marketing
Contact Katey Pigden at: katey.pigden@moneymarketing.co.uk
This article featured in the September 2023 edition of MM.
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