New Consumer Duty rules and transfers
The Financial Conduct Authority (FCA) recently wrote a series of Dear CEO letters to the Consumer Investment sector, outlining their expectations of firms regarding the new Consumer Duty rules.
The Consumer Duty rules are an entirely new set of conduct rules aimed at protecting retail consumers. These rule changes have already been described as the most significant regulatory and cultural shift over recent years and focus on producing good outcomes for consumers – something that has been neglected when it comes to transfers.
The STAR transfers initiative can help companies evidence their support of new Consumer Duty rules. Participating STAR firms who put themselves forward for accreditation, can showcase that they are focused on achieving timely transfers and good consumer outcomes.
STAR is a new award scheme, to tackle the issue of the amount of time it takes to transfer savings, investments, and pensions from one company to another. Transfers involve platforms, insurers, fund managers, re-registration and transfer intermediaries, custodians, third-party administrators and trustees. It also falls across multiple regulatory jurisdictions, with the FCA, Pensions Regulator and Department of Work and Pensions, all having an interest in different elements of the system. The STAR initiative was introduced as an alternative to regulation or legislation, to enable the industry to voluntarily get its house in order. For this reason, two independent and not-for-profit organisations (Criterion and TeX), joined forces to manage the improvements for the industry.
The STAR initiative awarded its first accreditations in November 2022, which is measured and accredited transfer performance across the industry. The awards are designed to both reward good performance and encourage improved performance.
The FCA has made specific references to STAR and transfers in their recent CEO letters, stating, “we also consider that more needs to be done to speed up transfers between investment platforms, and “we expect firms to do more to reduce platform switching times. The Duty guidance states ‘firms should make it easy to switch product, leave their service or make a change, as it is to buy the product or service in the first place. We continue to support the efforts of STAR, and we will continue to take action where we see firms falling below the standards we would expect.”
The FCA commenting said: “Improving transfer times is critical in improving consumers’ ability to shop around and switch to a platform that better meets their needs. The FCA is supportive of the progress STAR has made to date which aims to bring down transfer times. Reducing transfer times remains a priority for the FCA and Full MI will play an important role in ensuring this. Therefore, we are supportive of STAR continuing to pursue the Full MI and its publication. We will be actively following STAR’s progress towards its objectives.”
Andrew Marker, STAR chair commenting said: “We know there are pension companies and administrators that are happy doing things badly, relying on outdated systems and processes; sending pieces of paper in the post and waiting weeks to get things signed off. The only way to get these laggards and poor performers to improve is to normalise adherence to a commonly agreed set of standards. The FCA Consumer Duty guidance has prompted questions on who the new rules apply to, how firms can implement and monitor these changes, and how they will provide better consumer protection. Good consumer outcomes include firms being required to act in good faith and avoid causing foreseeable harm – the STAR initiative fits with these new rules. Namely, firms provide consumers the support they need throughout the lifecycle of their products and services, and a key area of focus for this is timely investment transfers. We encourage all firms not involved with STAR to join – it shows that you care about good customer outcomes, remain focused on timely investment transfers, and can evidence it with an accreditation.”
