Unpacking Consumer Duty: the cross-cutting rules and how to avoid 'foreseeable harm'
In the next instalment in our series, Vitality Group Compliance Director Steve Allibone investigates the impending ‘cross-cutting’ rules and what they might mean for financial advisers.
In recent weeks, we’ve explored how Consumer Duty is intended to raise the bar on client servicing in financial services, so far covering 'fair value' and 'good’ client outcomes.
Also central to Consumer Duty are its ‘cross-cutting’ rules, which lay the foundations for how the FCA expects businesses to operate with regards to their conduct towards clients.
“Driving regular ongoing client engagement can be extremely beneficial for advisers and the pursuit of better overall client outcomes.”
Steve Allibone, Group Compliance Director, Vitality
The rules, building on many years of previous regulations, are intended to provide a framework to deliver against the overall consumer principle of good outcomes for clients. To begin with, we’ll examine the each of the rules and what they mean.
Acting in good faith
Perhaps the least contentious of the three rules, the FCA describes this as a “standard of conduct characterised by honesty, fair and open dealing, and consistency with the reasonable expectations of consumers”.
The entire purpose and scope of Consumer Duty is to ensure that firms place the consumer at the heart of everything they do. It’s why the FCA has called on firms to appoint a Consumer Duty board champion, to hold the firm to account and where necessary act as the consumer voice.
Therefore, in the context of this rule it’s important that firms are prepared to consider their conduct from the perspective of the consumer and ask honestly whether they’ve embedded the right behaviours.
Avoiding foreseeable harm
Of the three rules, the requirement that firms must “avoid foreseeable harm to retail consumers” is the one that will stand out most for advisers.
For advisers, this particular rule arguably places high expectations on the standards and conduct of firms and the products and services delivered to clients. Whilst the FCA doesn’t expect consumers to be protected from all harm, advisers nonetheless less will need to give much greater consideration to all potential outcomes associated with the advice and recommendations they deliver.
It’s also important to stress that the potential for foreseeable harm to arise could occur at any point during a client relationship. A change in client circumstances, for example, could give rise to the potential for foreseeable harm that wasn’t previously the case.
Advisers therefore must be prepared and have the right processes in place to ensure regular ongoing contact with client is maintained. This is especially important with long-term products like protection insurance, where changing client needs could dramatically alter the suitability of any cover they have in place.
Long-term engagement
As a product provider, we can also play a key supporting role here and help advisers align with the Consumer Duty requirements, by delivering products that help to nurture and encourage long-term client engagement.
Indeed, this is one of the unique aspects of the Vitality Programme and we believe one of its key strengths: in driving regular ongoing client engagement, that can be extremely beneficial for advisers and the pursuit of better overall client outcomes.
The insurance cover itself can also be designed with this rule in mind. We see the pursuit of avoiding foreseeable harm reflected in numerous, often unique, features and benefits of the Vitality plans.
The ability to claim multiple times on our Serious Illness Cover plan for example avoids the potential harm that can arise if a client fell ill again after previously claiming and the further financial impact that could cause.
Meanwhile on our Income Protection plan, our unique earnings guarantee protects clients against the harm of a reduced benefit payment, if their earnings change.
Enabling consumers to pursue their financial objectives
The third and final cross-cutting rule is another element of the regulations that has particular significance to advisers and, once again, imposes a high expectation of standards.
A stand-out aspect of this rule is the expectation placed on advisers to help clients meet their financial objectives. Specifically, the FCA state that “a firm providing advisory services would understand more about an individual consumer’s specific objectives and would need to act on that knowledge”.
Further emphasising a point we’ve made previously, the regulations highlight that it’s not enough for advisers to simply act as the facilitator of the sale of a product driven by the client’s request in a transactional manner. Instead, client objectives should be properly addressed through a detailed understanding of their needs and appropriate product recommendations given.
It’s also important for advisers to properly consider what the client’s financial objectives might actually be and look beyond a more simplistic interpretation of this.
For example, on the face of it a client taking out a mortgage, their financial objective will be to re-pay the mortgage. However, we could argue that actually their objective is securing a roof over their head and therefore this has implications for the products and services recommended to them.
Another stand-out part of the wording used for this rule is the FCA’s expectation that clients should “enjoy the product and service they have purchased”.
In the context of Consumer Duty, we can take ‘enjoyment’ to mean the client is able to benefit in a meaningful way from the product or service.
This has clear implications for insurance-based products, where traditionally they offer little more than the promise of financial compensation in the event of a claim.
Delivering tangible value to clients and providing them with meaningful benefits they can ‘enjoy’ from day one is increasingly the direction of travel for health and protection products, and something we feel strongly about at Vitality.
In many cases, the expanding role of insurance products to deliver immediate tangible value, particularly through a range of rewards and benefits linked to health and wellbeing, can also play an important supporting role in helping clients to achieve their financial objectives. Afterall, regular engagement with a plan drives retention and, in Vitality’s case, helps to improve long-term client health outcomes.
Stress-test advice
Whilst the cross-cutting rules apply to all of us in the industry, there is arguably a particular emphasis here on advisers and distribution channels.
In setting expectations of standards and behaviours, it may be tempting to firms to disregard them in the belief they’re already following these principles.
However, in a post-Consumer Duty world, advisers will need to be prepared to scrutinise their processes and where necessary ‘stress test’ their advice against the desired outcomes of the cross-cutting rules.
This is about constantly asking ‘what if?’. In seeking to minimise the risk that something could go wrong, or that the client’s objectives are not met, advisers should be thinking about the potential ‘what ifs’ and whether the products and services will deliver the intended outcomes.
In many respects, we can also argue that the cross-cutting rules are another aspect of Consumer Duty that once again shine a spotlight on the importance of health and protection, alongside other advice areas.
We can see this for example in relation to mortgage advice, where real client harm could be caused by failing to discuss and arrange appropriate protection. The same could be said for broader financial planning, where a client’s long-term financial objectives could be negatively impacted through failure to discuss suitable health and protection cover.
To ultimately adhere to these rules and successfully deliver good outcomes to clients, advisers – and indeed the wider industry – will need to ensure they have the right processes in place embedded with the right behaviours and culture.
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In our 2025 VitalityHealth Claims Insights Report, we consider how consumer needs are changing, and how insurers - and advisers - are adapting to deliver the best possible outcomes for our clients, within a fast-changing environment.
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