Client Services and Ethics
This domain tests how firms treat clients and how individuals behave when money, information and incentives collide. Expect scenario questions where the technically legal answer is not the ethical one, and vice versa.
The Consumer Duty
In force for open products since July 2023, it sets a consumer principle (act to deliver good outcomes) plus cross-cutting rules: act in good faith, avoid foreseeable harm, and enable customers to pursue their financial objectives. Four outcomes must be evidenced: products and services, price and value, consumer understanding, and consumer support. Firms must perform fair value assessments and test whether communications are actually understood.
Conduct in practice
Treating Customers Fairly remains the ethical heritage behind the Duty's six original outcomes. COBS 2.3 governs inducements: fees, commission or non-monetary benefits must not impair judgement, must not be disproportionate, and must be disclosed. Personal account dealing must follow firm policy and avoid conflicts. Inside information must never be used or passed on - that is a criminal offence under the CJA 1993, separate from the civil market abuse regime.
Client money, records and complaints
CASS requires client money to be segregated and reconciled, so it is protected if the firm fails. Complaints must be acknowledged promptly and resolved within eight weeks, with a final response letter explaining the right to go to the Financial Ombudsman Service, free to the client, normally within six months of that letter. Vulnerable customers need appropriate support, particularly around bereavement, capacity and power of attorney.
Worked example
An adviser places £200,000 for a client and the product provider sends a case of vintage wine worth about £150. This is a non-monetary benefit: it must go on the firm's gifts and hospitality register, the adviser should consider whether it is proportionate and could influence future recommendations, and the safest course is to decline or share it with the team. Accepting it silently breaches both the inducements rules and the firm's conflicts policy.
Traps that cost marks
Assuming conduct that is legal is therefore ethical. Believing FOS is a regulator - it is a dispute-resolution scheme. Failing to record gifts, outside interests or personal trades. Discussing a client's affairs with a colleague who has no need to know.