The FCA has released its annual Business Plan for 2024/25, which sets out its primary objectives over the coming financial year and marks the concluding part of its three-year strategy (2022-2025) to drive positive transformation within the financial services market.

The Business Plan restates the FCA’s 13 public commitments and focuses on three main areas of focus:

• Reducing and preventing financial crime
• Putting consumers’ needs first
• Strengthening the UK’s position in global wholesale markets

It also lays out a number of steps that the FCA intends to take to further its ambition of becoming a more ‘outcomes-based, assertive and data-led’ regulator that’s able to meet the challenges of a fast-evolving market landscape and confirms its plans for growth in resource to 5,000 staff to meet its ever expanding remit.

Here’re our main takeaways of the need-to-know points raised in the announcement:

The FCA’s Business Plan 2024/25: At a glance

The regulator continues its commitment to safeguarding against financial crime

The FCA We will continue to take a data-led approach to identify potential harm for supervisory and/or enforcement action.

Whilst there are some signs that the economic climate may be returning to relative normalcy after a few challenging years for consumers and businesses alike, the regulator remains committed to addressing the numerous challenges stemming from geopolitical uncertainty, global financial risks and above-average inflation.

The FCA has outlined three primary goals that tie into the vision outlined in its three-year strategy:

• Protecting consumers – Setting and testing of the higher standards, continuing work on the Advice Guidance Boundary Review, ensuring fair value for money, and investing in new technologies to safeguard consumers from fraud
• Ensuring market integrity – Capital market reforms and intervening where critical risks are identified
• Promoting effective competition – Identifying where competition could be improved to deliver better value and optimise outcomes for financial services customers

Contextualising the agenda for the next 12 months, FCA Chief Executive, Nikhil Rathi, commented:

“We’ve already made significant progress in delivering against the bold vision we set out in our strategy two years ago, including the game-changing introduction of the Consumer Duty and proposing the most far-reaching reforms to wholesale market regulation and the listing regime in decades.

“We remain resolute in supporting the vital role the financial sector plays in the UK’s long-term economic growth, embracing the potential benefits that technology presents both for us and the firms we regulate, while also continuing to protect consumers and ensure market integrity.”

The FCA sets its sights on tackling vulnerability and poor outcomes

A core component of the FCA’s mission to protect consumers from poor outcomes will be testing firms to see if they’re adhering to the Consumer Duty – which came into effect in July 2023 for new and existing products and is set to be enforced for closed products from 31^st July this year.

Taking a proportional approach that prioritises high risk cases, the regulator will ‘focus [its] interventions where there is the greatest risk of harm or where more work is needed by firms to identify and address gaps and to meet the higher standards of the Duty.’

Accordingly,  firms should be turning their attention to preparing for their first Consumer Duty annual assessment, due by 31^st July, as boards and senior leadership teams will be held directly accountable for the services they provide to consumers.

Other areas of focus for the next 12 months include an investigation into how quickly insurance firms respond to customer complaints – including those with vulnerable characteristics – as well as a recently announced review of firms’ treatment of vulnerable customers.

So, it’s clear that the FCA will be ramping up its efforts to safeguard at-risk individuals and ensure firms are taking proactive measures to ensure good outcomes for customers – meaning now’s the time for firms to be conducting an honest evaluation of their customer lifecycle if they haven’t already.

Tech focus: Business Plan encourages ongoing digitalisation of the financial sector

As part of its efforts to cement itself as a ‘world-class regulator’, the FCA will continue its investment in smart analytics and process automation for both supervisory and enforcement applications. These tools are expected to help to identify and react to emerging risks in a quicker, more agile and efficient manner, allowing it to target higher risk firms and activities.

Indeed, the regulator notes it’s now ‘making better use of data to spot and stop harm faster and is being tougher on the firms that could cause harm’ – having removed more than 10,000 potentially misleading advertisements in 2023 and issued around 2,243 warnings regarding unauthorised firms and individuals.

Notably, the regulator is also eager for firms to take bold action to explore the possibilities of leveraging technology within their oversight strategies, having announced its intention to collaborate with firms on the ‘safe deployment’ of artificial intelligence (AI) systems over the coming year.

Almost a year on from the new Consumer Duty launch, firms should have a solid understanding of the data and MI they’ll need to conduct their processes and outcomes effectively. And that means that they should be actively exploring their options for technological solutions to fill any gaps in their existing oversight plan.

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