Three steps to the Consumer Duty starting line
The new Consumer Duty, which applies to existing FCA regulated products and services, as
The FCA has split its areas of compliance into four firm-consumer relationship outcomes: products and services, price and value, consumer understanding and consumer support.
As we countdown to the 31st October 2022, we’re spotlighting the first of these four outcomes – products and services.
Here, Neil Dethick Associate Director at TCC Group considers three important areas of this outcome.
Understanding the needs of your target customer is an important cornerstone to ensuring financial products and services meet the Duty requirements. The full lifecycle of a product or service should have the appropriate governance and evidence that the design, approval, marketing and ongoing management have been created with a specific demographic in mind. A Particular onus is placed on ensuring the needs of customers considered vulnerable are also met.
Neil Dethick explains: ‘Businesses will need to evidence how they’ve had the best outcome for their target market in mind when creating financial products and services and their associated marketing collateral.
‘A good rule of thumb to follow is, ‘if the FCA asked your firm to provide a substantial sample of customer journeys to prove you’ve had the customers’ best interests at heart throughout a product’s life cycle’, would you quickly and easily be able to evidence this pre- and post-sale? If the answer is no, the time is now to get these plans in place.’
As well as evidencing that customers’ needs are at the core of your business’s products and services, demonstrating that consumer feedback is gathered and incorporated into continuous product development is equally important.
Neil continues: ‘When launching a new product, how is target market research and consumer feedback incorporated? Does the firm have a demonstrable way of gathering consumer feedback and a process to ensure this feedback is heard?
‘The FCA will require that the products and services sold to customers have been designed to benefit them so being able to prove this is vital.’
Firms are also expected to have a Consumer Duty champion at board or equivalent level, who will be responsible for ensuring the Consumer Duty and its outcomes are discussed in a meaningful way.
The FCA will ‘monitor what products and services consumers use, and measure what consumers are seeing and feeling’ along with levels of customer trust and confidence. As the Duty is implemented, metrics will be created and measured by the FCA through a variety of sources such as management information, complaints data and through the FCA’s Financial Lives Survey.
‘The FCA has determined that they will be regulating with a more assertive, data-led approach under the new Consumer Duty, so they can quickly identify practices that negatively affect customers,’ comments Neil
‘This will include tracking if there’s an improvement in consumers’ feeling informed and confident about their experience of financial products and services.’
Learn more about the key steps your firm should take to prepare for the Consumer Duty’s four outcomes in our latest white paper:
Prepare for the FCA’s new Consumer Duty and achieve positive outcomes through compliance
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