Consumer Duty, The Future

There we have it, almost exactly two years since the Financial Conduct Authority (FCA) released their final guidance, the Consumer Duty is now fully in force! It felt like a long road, despite the fact that, by usual standards, we’ve not had long to implement the requirements. This is mainly down to the fact the rules strike at the very core of our businesses, requiring the review and amendment of the fundamental aspects of products. 

In our experience the progress made has generally been good. Most of the firms we work with have properly engaged with both the rules and their spirit, and have taken steps, as far as practicable, to follow them. The FCA has been more proactive than usual, providing updates along the journey which served to guide our implementation, mainly through the sharing of good and poor examples the regulator has seen.

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Without a doubt we’ve seen an uplift in the quality of most services in the market, one of the intentions of the Duty, if not the main. However, there are some organisations which have not kept pace. It’s clear that some find themselves behind the curve, there can be several reasons for this, but they generally include:

1. A failure to comprehend all aspects of the duty. The duty is complex and contains numerous new requirements. Examples of firms failing to comprehend these requirements include a lack of understanding of how to measure fair value, conduct outcomes monitoring, the change in the communication standard or even grasping the harms their product can cause. 

2. An over-reliance on previous standards deriving from an over-confidence in the impact their products and support services have on customers.

3. An assumption that everything is fine, and the products produce good outcomes, without relevant data to support this stance. 

4. Slow implementation of the duty, this mostly occurs because the ‘root and branch’ nature of the duty was not understood early enough in the process. 

5. Lack of resources or available information. 

If we’re honest, every single firm will look at the above list and identify at least one area they could improve on. This brings us to day two compliance. 

The duty, like most regulatory standards, doesn’t stop at the implementation date. During this period there is a clear structure for firms to work within: the implementation plan. This has now disappeared, organisations therefore need to understand what their ‘day two’ compliance will look like. 

We’re hosting a short live webinar on this topic in September, if you’re interested, please register your interest by emailing me: Robert.bell@rbcompliance.co.uk