What are the cross cutting rules?

What are the cross-cutting rules?

Hi. I’m Alistair McQueen at Aviva.

In this short video I will look at the Consumer Duty’s three cross-cutting rules.

I’d summarise the three cross-cutting rules as the three behaviours – or standards of conduct - that the FCA expects of us, in all we do.

First, we must “act in good faith towards retail customers”.

“Good faith” is characterised by honesty, fairness, and openness in our dealings. There is often an imbalance of knowledge and expertise between the firm and the client. By acting in “good faith”, we will not exploit this imbalance to our own advantage.

Second, we must “avoid causing foreseeable harm to retail customers”.

Harm, or financial loss, is often an inevitable risk that comes with many financial products. As we always say, “The value of your investment can go down as well as up, and you may not get back the full amount you invested”. The Consumer Duty does not demand that this potential harm be removed. But it does demand that any harm must not be the result of our actions, or inactions.

For example, a positive act towards the avoidance of foreseeable harm would be ensuring all charges are transparent and understood. Hiding charges would maybe ring Consumer Duty alarm bells.

So, study your operation from beginning to end. And ask yourself - is there anything you do, or don’t do, that could cause foreseeable harm?

And third, we must “enable and support retail customers to pursue their financial objectives”.

I’d say this is the other side of the “foreseeable harm” requirement.

Avoiding “foreseeable harm” is a defensive requirement – to stop customers experiencing harm. Protecting – or stopping - is essential, but it is not enough. We must also help customers move forward.

We must “enable”. We must “support”. We must help customers “pursue”.

For example, we must make it as easy for a customer to exit a product as it may be to enter. Any friction that makes life harder for a customer to pursue their financial objectives is sometimes referred to as a “sludge” practice. We must avoid “sludge” practices.

So, study your operation from beginning to end. And ask yourself - are you doing all you can to help your customer pursue their financial objectives?