Regulator abandons idea of introducing a duty of care for financial firms towards their customers
It may seem hard to believe from my picture in Money Marketing, but there was a time when I had a full head of hair. I was reminded of that time the other weekend, when a group of old friends came to stay. Over a convivial meal, we reminisced about heroic hairstyle failures of the past; in my case, the thin 1980s-style plaited rat tail I wore as a student nurse, tucked into the back of my uniform while at work.
Our boozy conversation that night also reminded me of another key element of life back then: that for all the occasionally ridiculous attempts to breach convention on acceptable haircuts, the clothes we wore or even the occasional herbal cigarettes we inhaled on our days off, our work itself ran along strict professional tramlines.
Central to that was our duty of care to the patients we looked after. Not only was it drummed into us that we had a legal duty of care where it was “reasonably foreseeable” that our work as nurses might cause harm to patients through our actions or omissions, but we also operated by a code of conduct set by the UK Central Council for Nursing, which explained and amplified that sense of professional duty.
What made a duty of care so vital was less the regulatory framework that policed those rules, but rather the set of cultural assumptions that lay behind it.
A duty of care meant taking into account the potential vulnerability of patients at a difficult time in their lives. It meant we were expected to anticipate the potential outcome of treatments and care decisions that were being made on behalf of patients.
Rather than focus on telling people what to do or not to do, or responding to a crisis once it had arisen, the focus was on not causing harm on the basis of a moral code of conduct.
In our school of nursing, our tutors would set us tests based on that code of conduct, drumming into us the fact that – completely separate from our practical work skills – we owed a duty of care to those we looked after.
Compare and contrast that approach with the FCA’s recently published feedback statement to the responses made to its July 2018 discussion paper on a duty of care, and you get a sense of a regulator travelling in a totally different direction when it comes to consumer protection.
Basically, what the FCA has said is that, having raised the possibility of introducing a duty of care for financial firms towards their customers nine months ago, it is abandoning the idea in favour of looking at its existing rules to make them work more effectively.
Specifically, the FCA is talking about reviewing how we apply the regulatory framework – particularly the Treating Customers Fairly principles – and how this is communicated to firms.
The FCA will consider new or revised TCF principles to “strengthen and clarify firms’ duties to consumers, including consideration of the potential merits and unintended consequences of a potential private right of action for principles breaches”.
In other words, it is telling firms to behave themselves or they might have to go to court.
The irony is that the regulator’s own document admits responses to the central question of whether a duty of care should apply to firms’ dealings with their customers mostly avoided addressing the subject.
It says: “Only a few respondents commented specifically on whether a firm should be subject to a fiduciary duty to its customers. Those in favour said a fiduciary duty would create the necessary, explicit obligation to avoid conflicts of interest altogether.
“Those who were against the idea told us that the concept of undivided loyalty to a customer is inconsistent with commercial enterprise.”
And there you have it: enshrining the concept of being loyal to a customer is not good business.
What respondents to the FCA’s July discussion paper would rather have, it seems, is a set of rules and principles which they can interpret in ways convenient to themselves – always staying on the “right” side of the regulatory framework, of course.
The fact other operators will push so hard against the framework that they and their customers fall off the edge of a cliff, costing the industry many hundreds of millions of pounds in compensation and further shredding consumer confidence, is immaterial.
What is missing from the FCA’s document is the moral code which should underpin the dealings between firms and their clients.
It is nothing new. The best advisers I know and respect already have that strong ethical sense and apply it every day in their work. It is what makes them so good at their jobs.
When I compare that approach with the current strategy used by the FCA, in which almost all its interventions are geared towards trying to shut the stable door after the horse has bolted, I know which method I prefer. But it is not fully embedded industry-wide, which makes it impossible to police effectively.
A bit like me growing my hair back, expecting the FCA to change its spots feels increasingly like a fruitless task.
Yet again, this is a missed opportunity for the regulator to show it is on the side of consumers.
Nic Cicutti can be contacted at email@example.com