Advisers should complain to the Financial Conduct Authority (FCA) if they do not receive target market data from insurers as required under Consumer Duty information sharing requirements.
This is according to FCA head of competition policy Ed Smith who was speaking on the regulator’s latest podcast ahead of the latest Consumer Duty implementation deadline.
The 30 April milestone requires financial services product manufacturers such as insurers to identify if any changes are needed to products or services and to provide information to distributors including advisers.
Supplying information on the target market
Smith noted that under the requirements, the FCA wanted manufacturers to giving details on their target customers.
“Generally, we would expect manufacturers to be supplying information on the target market. So, the people that the product is designed for, to their distributors,” Smith said.
“And we would also be expecting them to give information on the fair value assessment of their product. So, what have they done to assess the fair value to ensure that the benefits that consumers are getting are in line and proportionate to the costs that the consumers are paying? And those two elements should be consistent for manufacturers to supply to distributors in those circumstances.
Reiterating the points, he added: “Most manufacturers would need to supply fair value information and also target market information down the supply chain, so that distributors can understand the target market and whether the product is providing fair value, including when distributors put their own fees and charges on top of them for the distribution.”
Complain to the FCA
Smith also pointed out thatadvisers should not be afraid to contact the regulator if product providers were cooperating in sharing information.
“If distributors are concerned with a delay in the provision of the relevant information from manufacturers, and they’ve raised this with the firm and not received a reasonable explanation of when the information will be provided, then they should contact us about it, either through their usual supervisory contact or by contacting our supervision hub,” Smith said.
He emphasised the importance of the end of April deadline for manufacturers to pass information on to distributors: “We want manufacturers to really comply with that because that’s important for meeting the July deadline.”
And he promoted that overall, good cooperation between firms in the distribution chain is really important for making a success of the duty to ensure good consumer outcomes and assessments are passed down to distributors “so that the overall end product to consumers overall is fair value, is a product that’s well targeted meets the needs of the consumer.
“That’s really important. So, getting that cooperation in the distribution chain is really vital to those end consumer outcomes,” Smith added.
Compliance across the distribution chain
In terms of the timing of the 30 April milestone, Smith revealed this speaks to the point about firms working together across the distribution chain to ensure there are good outcomes for consumers.
“When the duty comes into force in July, all parts of that distribution chain need to be in compliance,” Smith continued.
“But there are things that manufacturers will need to do first as part of ensuring that compliance, for example, they need to review the products and services that they create to ensure that they meet the needs of an identified target market and ensure that the benefits of those products and services are reasonable relative to their costs so that they provide fair value to customers.
“Manufacturers need to undertake that assessment first and then they need to share that relevant information to the distributors in their supply chain. So that they can make sure they are aligned in understanding, for example, a target market – so who they should be marketing these products to – so that the right consumers get the right products.
“So, ultimately, it’s a process of sharing that information down the supply chain. And that’s why manufacturers need to start earlier in April so that distributors can then fulfil their obligations under the Duty and make sure that they are targeting the right customers.
“And overall, the product throughout the supply chain is providing fair value to consumers. So that’s why we’ve staggered it in that way in order to allow distributors a bit more time before July to assess the information they get from manufacturers and make sure that they’re in compliance with it.”
But Smith added the regulator has also been mindful of ensuring insurers leave enough time to make changes if they need to, to make changes to ensure compliance with the duty for some of their products potentially or some of their marketing literature or to make sure that they are fair value.
“We need that time,” he added.
“So, after they’ve assessed the products, they need to make any changes before the July deadline, that leaves them a little bit of wiggle room to do that.”