2020 – Regulatory net widens – can regulated firms learn from the pending changes?


With all that is going on around the world now, the 2020 budget seems to be quickly forgotten. It is the case in almost every budget that significant provisions and changes, those that have a significant effect on individual businesses, are hidden behind the headlines. The 2020 budget was no exception. This budget announced the widening of the regulatory net in respect of pre-paid funeral plans. When I say ‘hidden’, a search for the word ‘funeral’ in the 128 page “Budget Report” document returns 6 results. The announcement, “The Budget also announces that the government will provide protection against misleading sales tactics for consumers who are planning for their funeral, ensuring that all pre-paid funeral plan providers are subject to robust regulation by bringing the market within the remit of the FCA.”

Consumerists and professional funeral plan providers have welcomed the proposal in equal measure, but there is an apathy amongst existing regulated firms who, in their view, just see another delinquent industry being brought in line. Just like they did when the Claims Management Companies were brought into the FCA fold. Regulated firms shouldn’t let these moments pass them by without a bit of contemplating themselves.

Compliance and risk officers can learn a lot from reviewing what perceived or actual harms made structural changes necessary. Once those behaviours have been identified firms can review their own practices to re-check if they could face the same criticisms. The HM Treasury “Regulation of pre-paid funeral plans; response to the consultation” is a good starting place for such a review and, of course, the specific FCA rules when announced will also translate into other regulated business; especially those relating to sales, marketing and product transparency.

So, the question for compliance and risk officers is what were the concerns that led to this change being necessary and what should be reviewed in their own business.

So, the question for compliance and risk officers is what were the concerns that led to this change being necessary and what should be reviewed in their own business. Firstly, as with most regulated products, funeral plans contain a wide variety of product options, features and benefits despite being what should be a relatively simple product. There were concerns that what was and what was not included in specific plans was not always clear and transparent, especially taking into account that the target market for these products is often considered potentially vulnerable. Secondly, again like all regulated products, there are downsides that consumers need to fully understand so that an individual can achieve the right outcome for their specific circumstances and needs. It has long been felt that such risks have not been universally presented to consumers in a way that they can fully understand. Thirdly, concerns have been raised in respect of hidden charges.

One way to mitigate the risks of inappropriate consumer outcomes and/or consumers not fully understanding what they have bought is to take onboard the findings in the FCA output from its thematic review into “Customer understanding: Retail banks and building societies” [‘TR17/1’]. The fact the document was issued nearly three years ago does not diminish its relevance to firms today. These can be summarised as ensuring terms and conditions are easy to understand and are fair and transparent, not confusing customer satisfaction metrics with customer understanding and putting in place robust ‘checks and balances’ to ensure customer understanding.

It is always appropriate to review practices and procedures on a rolling basis, but now seems to be a good time to re-focus on ensuring good customer outcomes.


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Partner - Baxters Business Consultants - a business consultancy undertaking marketing, training, freelance journalism and expert witness services to the residential mortgage lending, building society and financial service industry (April 1993 to date) - www.baxtersbc.co.uk.

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