Ahead of the Consumer Duty implementation deadline of 31 July 2024 for all closed products and services, the FCA has issued Dear CEO letters to five financial service sectors, including a communication for Directors and CEOs at Consumer Investment firms.

Firms need to implement the Duty across all ongoing actions for closed products and services. However, the regulator does note there will be significant differences in how the standards are relevant in such instances. For example, the products and services outcome will not apply in the same way as there will be no further sales or target demographic to consider.

Areas to prioritise

The FCA highlights five key points which bring unique issues to closed products and services in the Consumer Investment Dear CEO letter. These include gaps in firms’ customer data, fair value and treatment of customers with characteristics of vulnerability.

Disparity in data

Due to the nature of closed products and services, there is a higher likelihood to have incomplete customer information on file. Therefore, it’s important to be rectifying such issues now and be taking proactive steps to ensure all basic customer details are up to date. This coincides with evidencing that your firm has taken “proportionate steps either to address the gaps, or to pro-actively work around these limitations”, so that good customers outcomes are demonstrated.

Progressive fair value

As with new and existing products and services, firms must show compliance with the price and value outcome of the Duty. This includes ensuring there is a “reasonable relationship between the price customers pay and the benefits of the product or service.” It’s a critical juncture for firms to ensure they have applied their fair value framework and justified why different approaches may have been taken between closed and open products.

Consider characteristics of vulnerability

Supporting customers with characteristics of vulnerability is a cornerstone of the Consumer Duty and is an element the regulator will be keen to see firms apply to closed products and services. It has been clear that progress in this area continues as the FCA is working with industry bodies to understand the disparity between their Financial Lives Survey which cited that almost half of all adults surveyed showed at least one characteristic of vulnerability. This is in stark contrast to data from a wealth management survey that found 49% of firms had not identified any vulnerable clients at all.

Entrust the experts

TCC’s team of industry experts and ex-regulators have been working with financial service firms to implement Consumer Duty strategies that will provide for a long-term compliant future.

Whether you’re looking for skilled guidance and support to drive impactful change within your business structure, or seeking assurance that your commitment to the Consumer Duty is rock solid, we’ve got you covered.