Firms regulated by the Financial Conduct Authority have been required to comply with a general principle of treating customers fairly, but the agency failed to halt a number of mis-selling scandals.

The new duty is particularly significant for being more granular, requiring "good outcomes" and no "forseeable harm" for customers across products and services, price and value. The duty includes an understanding of what's being sold, and after-sales support.

"We have been tracking those who are not ready or may not be ready and we will therefore be poised to take action and deal with firms who are not compliant and causing harm to consumers," Nisha Arora, a director for consumers and competition at the FCA, told Reuters.

"Where we see fees or charges based on nothing, or products that have no value to them, or excessive fees... those are the things that will attract our attention," Arora said, adding that firms could be asked to adjust prices or change the product.

The duty will help the FCA tackle harms pre-emptively to stop a mis-selling scandal in the first place, she added.

"What we are asking for is not unattainable," she said.

Firms will have to demonstrate to the FCA how they are providing good outcomes, a step the watchdog hopes will improve on the low trust in financial services.

"It essentially moves the burden of proof from the regulator to prove detriment, to the firm to say you must be able to evidence good customer outcomes," said Philip Deeks, head of KPMG's regulatory insight centre.

The duty is already having an impact. Wealth manager St James's Place said last week that following a review ahead of the rule, it was changing its fee structure, denting net income by 12 million pounds in the second half of the year.

END OF THE BEGINNING

The new rule will be a major step for most firms in practice, said Jonathan Herbst, global head of financial services regulation at Norton Rose Fulbright law firm.

"Even so, everyone recognises that this is really only the end of the beginning, and there is considerable uncertainty about how it will be interpreted and enforced by the FCA," Herbst said.

The FCA, which regulates 50,000 firms, estimates it will cost a one-off 2.4 billion pounds ($3.1 billion) for firms to implement the duty, and is spending 5.3 million pounds on "embedding" it.

It says it will help ensure that banks pass on higher interest rates to savers, and provide help to those struggling to pay a mortgage.

KPMG's Deeks said the next step will be strategic revaluations by companies that could question their ability to show compliance, potentially to the point of some leaving the market.

Deeks said: "We will probably see some product simplification and some product rationalisation as well, but on the upside it should also create innovation, with new needs identified by stepping closer to customers."

($1 = 0.7770 pounds)