The impact of Covid-19

 The financial services industry is no stranger to change. The unrelenting tech revolution and growing RegTech ecosystem has slowly but surely been transforming consumer behaviour and regulation for years. But with the onset of a global pandemic that shut down the nation, 2020 has been – dare we use the word – unprecedented.

New risks are emerging all the time off the back of the crisis. Unsurprisingly, the FCA has repeatedly said it won’t be offering any regulatory forbearance. Robust controls and up-to-date compliance agendas are more important than ever.

The FCA’s focus will likely be two-fold in 2021, scrutinising both firm-level issues like operational resilience, along with the wider social impact of the pandemic and the way in which customers have been treated during this time.

  • Treating customers fairly

The focus on treating customer fairly – particularly those who are most vulnerable – is nothing new, but the pandemic has forced the issue right to the top of the priority list, and we’ve seen a host of Dear CEO letters on the matter sent out to firms over the past year. More than ever, the FCA has stressed that TCF principles and vulnerability need to be considered at every stage of the consumer journey, starting with new product/service development.

Here’s our top tips for perfecting your approach to vulnerable customers:

  1. Embed vulnerability in your culture. All staff – from senior management to product development teams and frontline customer service staff – need to understand the needs of vulnerable customers and be focused on achieving fair outcomes for them.
  2. Understand your customer base. By mapping the most pertinent issues in each of your customer segments, you can start to arm your frontline teams with knowledge of what to look out for when talking to customers. Start with the most common drivers of vulnerability – health, life events, resilience and capability.
  3. Review your current practices. Determine how your current practices, processes and procedures will impact each customer segment and consider whether you need to update your policies to plug any gaps in your approach.
  4. Upskill your staff. Help your staff to spot and handle vulnerable customers properly. Interactive training, external training from charities or informal discussions with your team are all options.

Keeping vulnerability and TCF principles in mind is particularly important when considering how to support customers in financial difficulty. As the end of payment holidays continually hovers on the horizon, the FCA has stressed the need for firms to take a tailored approach to forbearance and consider the best interests of customer.

Learn how to deliver great customer outcomes in the age of Covid-19 with our free eBook. We cover key issues like vulnerability, complaint handling and treating customers in financial difficulty fairly.

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  • Maintaining a robust control environment from afar

Has the Covid-19 crisis sparked a permanent shift away from the traditional ‘jacket-on-the-chair’ culture of financial services? Perhaps not. But the pandemic has sparked increasing demands from firms and employees to integrate remote working into ‘normal’ working life. Nevertheless, the FCA has raised concerns around the conduct risks a dispersed team presents.

And there’s no getting away from the fact that remote working on this scale is a different ball game to what it was before – where some might’ve been used to working on the road, and being out and about with customers or clients, the same probably can’t be said for most of your staff.

We think the solution lies in culture. And there’s a few things you can be doing to enhance your organisational culture remotely, thereby reducing conduct risk, ensuring good customer outcomes and satisfying the regulator.

  1. Creating a sense of purpose, and uniting employees behind your cause
  2. Build trust among your team by providing opportunities for people to speak up or challenge decisions
  3. Identify informal influencers within your business and get them on board – they are often the key to setting standards of behaviour

Find out more in our free eBook. We unpick the core drivers of culture according to the FCA, with our tips on how to meet expectations.

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Operational resilience

The Covid-19 pandemic was the ultimate test for the operational resilience of many firms. But despite the many logistical challenges, the financial services industry has so far come through the crisis relatively unscathed. However, it did shine a light on the importance of being prepared for disruption, whether that be third-party issues or a data breach.

As such, the FCA is due to publish its policy statements on the matter, alongside the PRA and BoE. In order to be proactive and protect your business, you should already be mapping out your key business activities – those that need to stay functioning in order to service customers – and the resources needed to keep them running. We’d also recommend stepping up your assurance and oversight of third-party providers. They play a key part in your ability to serve your customers and meet regulatory expectations.



The end of the transition period came and went, and while a new UK-EU trade deal was secured at the eleventh hour, it offered little in the way of clarity for the financial services sector. The FCA has put in a number of measures to ensure a stable and smooth transition, including the temporary permission regime (TPR).

In Q1 of 2021, we expect to see the finalised guidance to the FCA’s consultation paper on its approach to international firms. 



Come March 2021, solo-regulated firms should’ve undertaken the first assessment of the fitness and propriety of their Certified Persons, submitted their data for the FCA Directory, and trained all staff across the business on the new conduct rules.

Interestingly, the FCA has previously come under fire for having ‘no teeth’ when enforcing SMCR. With the watchdog repeatedly reinforcing its commitment to improving culture and governance, with the regime at the heart of it all, it could be that the regulator doubles down on enforcement in response to said criticism. In which case, you need to be ready.

Firstly, you’ll need to get all the evidence lined up to show that every Certified Function holder in your business is fit and proper, and that you can clearly demonstrate the assessment criteria. For both the certification regime and the new conduct rules, aligning annual assessments and training with existing HR processes can save a lot of time and effort.

To fully meet FCA expectations, we’d recommend using scenario testing on a regular basis. This’ll uncover how robust your SMCR arrangements really are, whether your Senior Managers truly understand what’s required of them, and whether you need to plug any gaps in your policies and procedures.


As the key to ensuring good conduct, culture has been firmly in the regulatory hot seat for years. But over the past year we’ve seen the narrative shift slightly. Once considered a useful tool to avoid good people doing bad things, it’s now about equipping and enabling good people to do better things. It’s about driving an approach to compliance that is centred around ethics, rather than box ticking. And the FCA isn’t alone in its thinking —regulators across the globe, from the New York Fed to APRA and ASIC in Australia, are all focusing in on culture.

It's now about equipping and enabling good people to do better things

This year, we’ll see a culture assessment become part and parcel of the FCA’s existing firm supervision model, so it helps to be ready. The focus will largely be four key areas:

  1. The day-to-day understanding and identification of conduct risk
  2. Remuneration and performance assessments
  3. Leadership and management capabilities
  4. The role of psychological safety, beyond whistleblowing

Read our quick guide for a practical framework that’ll help you master the basics.

Read the guide
  • Diversity and inclusion

Closely related to the topic of culture is diversity and inclusion – something that continues to be an issue across the industry despite increasing awareness. The regulator believes that diversity and inclusion is a key part of ensuring good conduct. After all, good decision-making comes from strong challenge, and you can only achieve that when you have different points of view. So, make sure any culture programme you’re undertaking keep diversity and inclusion front and centre.

  • Non-financial misconduct

As part of its work on culture, the FCA is doubling down on non-financial misconduct, which includes behaviours like discrimination, harassment, bullying and victimisation. 2020 saw three individuals banned from the industry following their conviction of serious criminal offences.

On the less extreme but equally damaging end of the scale, non-financial misconduct can easily go unchecked in your business. But ultimately, this indicates a culture where people don’t feel safe to speak up. And this is something the FCA won’t be tolerating,  given the potential negative impact on customer outcomes.


Advice markets review

In late 2020, the FCA finally published the long-awaited outcome of the Retail Distribution Review (RDR) and the Financial Advice Market Review (FAMR). The report suggested that more consumers are keeping their money in cash. And, while awareness of automated advice solutions has grown, uptake hasn’t quite been as high as expected, leaving a concerning advice gap. Ultimately, it says, more innovation is needed to provide the right consumer outcomes.

It’s still unclear what action the FCA will take, if any, but it will be assessing how it can support different advice models in H1 2021. One thing is for sure – the FCA wants to see more competition and innovation in this space, so start scoping new opportunities to deliver value for money now.


Pension transfer advice

In other pension news, 2020 saw new rules on reporting and workplace schemes, as well enhanced CPD requirements, as part of the FCA’s bid to improve standards in the Defined Benefit Transfer market. To make the most of these changes over the coming year, we’d suggest you:

  • Consider the level of detail you now have to report on a golden opportunity. This is your chance to scrutinise the DB transfer business you’re undertaking, and spot any red flags before the regulator does.
  • Be particular with the external training provider your partner with to deliver CPD hours. The best will have broad market experience, and will be able to provide real insights on best practice.

Beyond that, 2021 will see Handbook changes that raise the qualification level for pension transfer specialists (PTSs). By the end of the year, they’ll be required to obtain the Level 4 qualification alongside the existing PTS qualification.

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