Financial Services

Profits or Protecting the People? Recent spate of FCA fines: who’s really paying the price?

5 min read

Just four months into 2024 and the FCA has been relentless at proving that Consumer Duty is every bit the ‘TCF with teeth’ the industry expected it to be. Companies have been panic provisioning following intense regulatory review including: 


  • St James Place (SJP) set aside £426m last month to cover compensating up to 100,000 clients for ongoing services that were, in fact, not going on at all. The provision is so significant, it has put SJP in the crosshairs of potential M&A activity according to analysts RBC. This comes hot on the heels of SJP scrapping its exit fees last year following the introduction of Consumer Duty.    


  • In the same month, Close Bros carved out a £400m capital buffer as it braced itself for compensation payout for motor finance commission malpractice


  • Phoenix’s shares took a beating when they announced a £70m provision plan to cover the cost of fee changes to align with Consumer Duty 


  • The, now ironically named, Inspirational Financial Management firm was fined almost £900k over poorly advised transfers out of defined benefit pensions schemes. 


In the wake of all this high profile activity involving some of the industry’s bigger players, it’s worth looking at how the trend of FCA fines has changed in the past three years. Records show, the number of fines has increased significantly but the overall value has dropped suggesting increased action against smaller firms. Steeleye suggests that, “…while in previous years, regulators have focussed on large-scale breaches by big banks and blue chips, enhanced supervisory technology has improved their ability to identify and take action against failings across market participants of all sizes.”


Source: Linkalters, 2023


Now it’s clear size doesn’t matter, the regulator continues to turn the thumbscrews, particularly on the advice industry.  FCA chief, Nikhil Rathi, has said as much when addressing the FCA’s business plan for 2024-2025, confirming Consumer Duty and the advice/guidance boundary review will be the regulatory’s top priorities. It has also recently issued a series of Dear CEO letters to advice firms asking them to review their processes when providing retirement income advice following thematic review


Sarah Pritchard, Executive Director of Markets and International at the FCA said of the thematic review, “Some firms are getting this right and making a real difference to their customers. However, others are not even getting the basics right and putting their customers’ futures at risk. We urge all firms to take on board our findings and review their own processes. Where they do not, we will act.”  


As consumers continue to struggle through the cost of living crisis, the FCA has also set its sights on debt collection practices. It issued a warning to firms to stop excessive communication with customers in debt, more clearly sign post free debt advice and make it easy for debt advisers to contact them on behalf of their clients. This is in addition to the regulators’ warning to banks to improve the way they treat small business owners when recovering debt and warning insurers to protect customers from unnecessary product add-ons or unfair penalties.  


Given this seemingly endless series of warnings, letters and fines, are things really improving for consumers? In the FCA’s Financial Lives Survey, an estimated 7.4M people tried – but failed – to get in touch with their financial services providers and more than 3M managed to get through but then didn’t get the support or information they were looking for.  And these findings aren’t surprising, tallying up with the FCA’s statement that it is ‘unlikely’ most advice firms meet some Consumer Duty rules.     


Rightly or wrongly, it was quite widely anticipated that many companies wouldn’t take Consumer Duty seriously until the FCA started to dole out the fines. The attitude of ‘wait and see’ was borne from half-hearted regulatory guidance of the past that didn’t go quite far enough to incentivise companies to take the right action by their customers. But now significant provisions have been made, and the FCA has requested data from the biggest advice firms of their ongoing advice services, is the tide beginning to turn? 


In a survey done in 2023 is anything to go by, the UK financial services sector has a lot to prove. This survey found only 24% of consumers trust the UK financial services industry to act in the best interests of clients while 31% distrust the industry. However, according to a concurrent survey done in the same year, 80% agreed or strongly agreed they trusted their provider across current accounts, credit cards, mortgages and personal loans and savings accounts, up from 65% in 2015.  Proving Mark Twain’s observation that ‘Facts are stubborn, but statistics are more pliable,” perhaps consumer trust isn’t the best barometer of industry improvement and consumer duty efficacy.



In the interests of a balanced view, it’s worth looking at things from an industry perspective too. Whilst critics are quick to paint some financial services firms as morally questionable, profit mongers (which, in some cases, is completely warranted), not all companies should be tarred with the same brush.  A recent survey of advisers by Gunner & Co found that regulation is unquestionably driving more advisers to retire. Time and resource are proving a challenge for smaller firms to produce the data and evidence they need for the FCA and another poll found that 70% of IFAs say the FCA has been unclear about Consumer Duty and that the new rules had resulted in 72% reporting increased admin and 61% saying they have less time to advise clients. 


So the question remains, almost a year on from Consumer Duty, who’s really paying the price? In the short term, the answer seems to be twofold. Consumers are certainly impacted by the state of the economy, advice gap, and the lingering effects of past misconduct. However, the industry itself is also feeling the pinch, with increased compliance burdens and potential profit erosion from necessary changes. Ultimately, the success of Consumer Duty will hinge on whether these short-term costs translate into a long-term benefit: a financial services industry that prioritises consumer well-being and rebuilds trust. Only time will tell if the FCA’s efforts will truly usher in a new era for consumer protection.

Related posts

Financial Services
Just four months into 2024 and the FCA has been relentless at proving that Consumer Duty is every bit the ‘TCF with teeth’ the industry expected it to be. Companies...
The financial services (FS) industry is steeped in complexity and ever-evolving regulations. From process inefficiencies to outdated legacy systems that require manual data input that hasn’t been maintained to a...
What is the EU AI Act: the key takeaways   The December 2023 EU AI Act is the first comprehensive legal framework for AI in the world. It aims to...
Consumer Duty
Based on current trends and strategic planning, here are the top 5 regulatory developments the Financial Conduct Authority (FCA) will prioritise in 2024 and everything you need to know about...
We know that there’s a lot to come in the next twelve months. That’s why we asked a popular chatbot what it predicts to be the top 5 generative AI...
Adviser productivity
Cavendish Online, part of Lloyds Banking Group, has partnered with, the Artificial Intelligence fintech business, to become one of the first protection distributors in the market to use AI...
Financial Services
Nothing gets us through the day better than a podcast. That’s why we’ve put together this list of our top 5 financial services podcasts to add to your playlist for...
Adviser productivity
In a perfect world, financial advisers would only spend their time providing personalised financial advice to their clients. But, alas, we’re in the real world, where a good chunk of...
Consumer Duty
Navigate the uncertainties of Consumer Duty with our free Consumer Duty Board Report Template.   We all know that the Financial Conduct Authority’s (FCA) Consumer Duty regulations are now in...
Like us, you’ve probably noticed that generative AI is causing a productivity revolution. In order for this to be successful, your business needs to adopt domain specific solutions built for...
Adviser productivity
It wasn’t so long ago that the thought of receiving financial–or any–advice from a machine would feel like something from a film, and likely heavily caveated with warnings about the...
Financial services institutions operating in today’s regulatory landscape face a myriad of challenges in ensuring compliance and quality assurance in their operations. To tackle these hurdles, Aveni has been at...

Aveni’s platform uses the latest in NLP to transform productivity and risk oversight.

Scale compliance at a fraction of the cost

Cut financial advice admin from hours to minutes with Aveni’s AI assisitant

Aveni Assist

Get up and running with Aveni Assist and how it can help transform productivity and compliance. 

Aveni Detect

Get up and running with Aveni Detect and how it can help transform productivity and compliance. 

Read the latest articles from Aveni

Access our latest whitepapers, webinars, brochures and more

Jargon-bust your way to a better understanding of all things AI