The Consumer Duty – Is Your Programme Fit For Purpose?

Recently the FCA has provided feedback regarding the first 6 months of Consumer Duty (“the Duty”) implementation.  This has been given through both a speech, delivered by Sheldon Mills, and a Report covering good practice and areas to improve.  The findings in the report, and information delivered through the speech, are built on from the results of the Autmn 2023 Survey, which looked at how firms are dealing with the implementation of the Duty and where firms were struggling.

Autumn 2023 Survey

The survey results make for some interesting reading as they give insight into the areas in which firms are finding challenges.  A key theme concerns the difficulty firms are experiencing in implementing new frameworks to comply with the Duty.  The survey found that 28% of firms are finding Outcomes Monitoring (including data and metrics) difficult, which was the highest area of difficulty found.  This was followed by Price and Fair Value Outcome, Consumer Understanding and Scope of the Duty (all 15%) and the Cross Cutting Rules (10%) as the next most difficult areas to implement.

These headline statistics show that firms, even 6 months into implementation, are finding challenges in developing compliant frameworks or, alternatively, finding it difficult to understand what the FCA expects in relation to the different aspects of the Duty.  Therefore, the information released by the FCA should be viewed as a vital helping hand to firms.

Consumer Duty Report – Guidance

The latest report provides guidance to firms regarding areas of the Duty, highlighting both what the FCA would consider ‘good practice’ and, through the gathering of data, ‘areas for improvement’.  The report is broken down into six sections, in relation to the Duty, and these are as follows:

1. Culture, governance and monitoring;
2. Consumers in Vulnerable Circumstances;
3. Products and Services;
4. Price and Value;
5. Consumer Understanding; and
6. Consumer Support.

The report sets out the outcome the FCA wishes to achieve from each area before providing specific examples of observed good practice and areas for improvement.  These examples should be used by firms to review and cross reference with their own processes to ensure compliance with the FCA’s expectations.

Good Practice

The FCA has highlighted some good practice examples spread across the various sections of the Duty and include, but are not limited to, the following:

• Culture, governance and monitoring: “Firms should develop new data and metrics to better understand their customers. Introduce appropriate governance so that action is taken where problems are identified.

• Consumers in Vulnerable Circumstances: “Firms should consider the needs of customers with characteristics of vulnerability as part of product and service design. For example, some firms have found different ways of supporting those who are elderly, such as by using ‘selfies’ for identity verification to confirm they are not being scammed”

• Price and Value: “Firms could consider capping fees for long-term clients and waive fees entirely where firms could not justify the product’s cost.”

The good practice examples provided throughout the report should be used by firms to cross reference their own frameworks to tackle the Duty.  If a firm feels that its framework does not align with such good practices, consideration should be given regarding ways to amend the framework to fall in line with the FCA’s expectations.

Areas for Improvement

Similar to the examples of the good practice, the FCA highlights areas that require improvement.  Again, these are split out into the six subsections.  The examples include, but are not limited to, the following:

• Consumer Support: “not seeing firms train staff well enough in terms of having complex conversations with customers. The FCA expects firms to train their staff to an appropriate level so they can support good outcomes for their customers, for example by understanding their circumstances and finding appropriate and tailored solutions where needed.”
• Consumer Understanding: “Firms being unclear with customers about what charges apply, and when. One way to improve customer understanding is to provide worked examples of product and service costs.”
• Products and Services: “Firms failing to grasp that they might have a role in a distribution chain, what that role is, and what it means for their responsibilities. For example, where a firm has a material influence over retail customer outcomes but is in a distribution chain and does not have a direct relationship with the end retail customers, it will still be subject to the Duty.”

The examples provided allow a targeted approach for firms to begin reviewing their developed frameworks and allow amendments to be made with the feedback provided by the FCA.  With this information being widely available, firms have no excuses to not review their frameworks and develop processes and procedures that robustly stand up to regulatory scrutiny.

How Can Complyport Help

Discover the comprehensive range of services provided by Complyport, designed to guide and support firms throughout their Consumer Duty Implementation journey.

Our offerings include:

1. Online Implementation Readiness Assessment:

• • Utilise our user-friendly online questionnaires to demonstrate consideration for Consumer Duty and identify gaps and areas for improvement. This assessment serves as a foundation for developing an effective implementation plan.

2. Consumer Duty Service package:

• • Benefit from a holistic package that encompasses various elements, such as:
    • Diagnostic assessment to determine the applicability of Consumer Duty.
    • Report Templates to streamline your documentation process.
    • Working Papers and relevant rules to ensure compliance.
  • Choose from our suite of meticulously designed policy templates, including:
    • Product Assessment Policy
    • Consumer Duty Working Papers (client version)
    • Consumer Duty Monitoring (client version)
    • Fair Value Assessment Policy
    • Consumer Duty Diagnostic Assessment
    • Consumer Duty Annual Report

3. Consultancy Services:

• • Access contracted and ad hoc consultancy support, both pre and post-implementation deadline. Our experts will assist you with regulation interpretation and address any personal queries, providing you with peace of mind throughout the process.

Partner with Complyport to navigate the complexities of Consumer Duty Implementation seamlessly. Our tailored solutions and expert guidance will empower your firm to meet regulatory requirements effectively.

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