Three steps to the Consumer Duty starting line
Times are changing, and this can seem an overwhelming period for FCA-regulated firms as they
Times are changing, and this can seem an overwhelming period for FCA-regulated firms as they get to grips with the new Consumer Duty and explore how they’ll become compliant.
The pressing Implementation Plan deadline of Monday 31st October is now only a matter of weeks away, so we’re taking a closer look at what changes firms can consider to meet these new regulations.
Customer care lies at the heart of the Consumer Duty, with its aim to ‘set higher and clearer standards of consumer protection across financial services’. The new legislation’s overarching Consumer Principle aims to cement customers’ needs and well-being as the ultimate priority to firms. The FCA will lead this focus with ‘assertive supervision’ and will be more proactive and interventionist with its regulatory powers than ever before.
Ultimately firms will be required to demonstrate their commitment to this regulatory standard with a ‘show me don’t tell me’ approach to ensure a more positive consumer culture is at the crux of their firm’s ethos.
Achieving positive results for customers through four key outcomes is an essential part of the new duty, these outcomes are: products and services, price and value, consumer understanding and consumer support. The FCA also stresses the importance of considering customers’ needs at every step of their consumer journey, with particular onus on meeting the needs of the most vulnerable.
Boards (or an equivalent management body) are responsible for ensuring that the Consumer Duty is firmly on their company agenda. Within this, the important areas to consider include:
Neil Dethick, Director at TCC group explains:
‘Implementation, consistency and continuous measurement and review is going to be of critical importance when firms are demonstrating their commitment to the Consumer Duty. With only weeks until Implementation Plans need to be ready, boards that take practical, demonstrable steps now will sow seeds for ongoing future compliance.
’We recommend appointing a Consumer Duty working group within the firm that leads with proactive steps. This should include a detailed gap analysis on their product and services design and delivery, the customer journey life cycle as well as thorough re-examination of the management information contained for board level consideration and action.
‘Consistent engagement of their appointed Consumer Duty working group throughout these processes and validating that suggested solutions are compliant with the new regulations, are all positive steps to get Implementation Plan and Consumer Duty ready.’
The FCA will require that firms are acting in good faith to deliver positive outcomes for all their retail clients, whilst taking all reasonable steps to avoid causing foreseeable harm to their customers as they pursue their financial objectives.
So, in practical terms how can boards ensure their firms are meeting these expectations? Identifying what constitutes a ‘good outcome’ and what is fair value to customers (and how this is assessed and benchmarked) is a sensible starting point – whilst ensuring this is understood by departments that lead with product and service design.
Understanding your target market and evidencing how your firm’s products and services fit this demographic is another critical point to consider. This includes reviewing all existing client communications (including your website and promotional assets) to confirm they meet the ‘clear, fair and not misleading’ standard.
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