Navigating Consumer Duty and New Financial Changes

Unknown Speaker

Hello everyone and welcome back to the B-Compliant Podcast! I’m Vicky Pearce, and as always, I’m joined by the indomitable Rachel MacRae, ready to tackle another week of regulatory twists and turns. How are you doing, Rach?

Rachel MacRae

I’m good, thanks Vicky! Honestly, already knackered but the regulatory news definitely kept us on our toes. You know what, let’s just get stuck in – Consumer Duty, mutuals, the lot!

Unknown Speaker

Alrighty. So, headline act this week has got to be the FCA’s multi-firm review into Consumer Duty for small mutual life insurers. Now, we’ve talked loads about the Duty in other episodes, but this one’s interesting because it’s mutuals – a space that sometimes gets a bit overlooked, right?

Rachel MacRae

Yeah, and I think people assume mutuals always do right by members because of their structure. But the FCA’s findings said... well, yes and no.

Unknown Speaker

That’s it. On the one hand, lots of mutuals genuinely want the best for their customers – you can see that. The review shows they’re getting the basics like customer-centric planning. But, and it’s a big but, many have these broad, woolly target markets. It’s like “our products are for everyone,” which just doesn’t wash anymore under the Duty, especially when you’re meant to show fair value using PROD 4.

Rachel MacRae

It’s tricky though. I mean, you want to help as many people as possible but if you can’t evidence that value for specific customer groups, the FCA will call you out. And if your MI data isn’t robust, that’s when you start missing who’s really benefiting – or not – from your products.

Unknown Speaker

Absolutely. We do often see firms have really broad target markets, basically “any UK resident under 70”, but we try to encourage our client's to get specific, really narrow it down, and whilst the firms we talk to aren't the mutuals, like in the FCA's review, the feedback from this is transferable and something all firms should be considering.

Rachel MacRae

That's right! When a firm has a clear, specific and well defined target market, it makes it so much easier to collect evidence and show their products or services deliver good value. And that’s what the FCA’s flagged as good practice here—using management information to really tailor and prove you’re delivering fair value. it’s not just a box-ticking thing. If you know exactly who you’re serving and why, you can spot problems—like unresponsive customers who’ve fallen off the radar. That came up in the FCA review as a weak spot too. If you’re not tracking engagement, you might not even realise you’ve got customers at risk of harm.

Unknown Speaker

One of the other issues the FCA looked at in their review was ways to improve things for with-profits policyholders; our clients often come across these older policies and struggle to compare them to more modern schemes, as charges aren't explicit, so the FCA's recomendations that ongoing financial modelling should be more robust and tested against real scenarios, not just a spreadsheet is good news.

Rachel MacRae

Let's swing over to the Financial Ombudsman Service for a sec, even though we all know I love Consumer Duty. They’ve just put out their plans and budget for 2026/27, promising faster resolutions: 245,000 cases to go through, and over 80% sorted within six months. I feel like some of our clients have been caught in an Ombudsman loop before where everything just drags and drags.

Unknown Speaker

Oh, don’t get me started! We’ve had clients in the past who have been stuck in limbo not recieving a decision for a year. These delays are not good for firms or the clients making the complaint, the uncertainty of the long wait can be as much of a problem as the complaint itself. So this new target for faster complaints could really ease all those backlogs.

Rachel MacRae

If FOS genuinely delivers on these six-month timelines, firms and clients will both breathe a sigh of relief. Oh, and the drop in new cases—the fee for professional representatives has really had an impact, with fewer being lodged and allowing better focus on what matters, like investment and pension cases.

Unknown Speaker

And let’s be honest, those are the gnarlier ones. If those get resolved faster, that’s a win for everyone. The Ombudsman isn’t just getting quicker, it’s also nudging firms to do the right thing at the complaint-handling stage so fewer issues ever get that far. As we touched on in that episode on complaint reporting and consumer outcomes, early resolution helps everyone. Plus, there are those little practical updates—like the new interest calculator for awards—that should make redress less of an admin headache.

Rachel MacRae

It’s those operational pressures that add up, isn’t it? The less time you spend following up old complaints, the more you can focus on, well, actually supporting clients and planning ahead. Anything that brings predictability back into advice is a godsend. The cost increases—yeah, bit annoying—but still a massive improvement compared to a couple of years ago.

Unknown Speaker

Right, let’s pivot to updates on levies and inheritance tax—honestly, never the most glamorous, but blimey do they matter for forward planning. The FSCS Management Expenses Levy Limit for 2026/27 has been proposed at £113 million—just a modest increase, mainly tracking inflation, but it means the compensation scheme will stay resilient even if there’s a sudden spike in claims.

Rachel MacRae

I know most people glaze over on the word “levy”, but if you want a stable market, these details are non-negotiable. Plus, advisers shouldn’t forget—the schemes only work if they’re funded properly and can step in when needed.

Unknown Speaker

Exactly. And on to something that had quite a few farming and business clients buzzing —the rise in Agricultural and Business Property Relief thresholds. From April 2026, the relief doubles to £2.5 million; this has obviously come about as a result of the widespread feedback from the farming community and business owners after the less than popular reforms announced at the Autumn Budget in 2024.

Rachel MacRae

This means married couples and civil partners will be able to pass on up to 5 million pounds of qualifying assets before any inheritance tax even enters the chat. For farming families or businesses who were staring down the barrel of a big inheritance tax bill with the old regime, this is some good news, halving the number of estates hit and liabilities reduced by hundreds of thousands of pounds in some cases!

Unknown Speaker

Definately good news to see that feedback has been taken on board, and something positive has come from it. Oh, and before we sign off, one more for the operational resilience crowd—the new Memorandum of Understanding between UK and EU regulators for critical third parties. It’s all about making sure cross-border providers don’t fall through the cracks if there’s, say, a cyber incident. Builds on what we discussed in episode 4, about co-ordination and making rules fit the real world.

Rachel MacRae

Plus, it doesn’t water down what firms themselves need to do with their own outsourcers—still all your usual responsibilities, but now with an extra safety net if something goes awry. The theme this year really is resilience from every angle, isn’t it?

Unknown Speaker

That’s it from us this week. There’s a lot to chew over, so if you want help or have a query about duty reviews, FOS cases, or planning for levy and tax shifts, do get in touch—we are always happy to chat. Thanks for joining me as always, Rachel!

Rachel MacRae

Pleasure as always, Vicky. Thanks to everyone listening and we’ll be back soon with more regulatory nuggets—take care, everyone!

Unknown Speaker

Bye for now!