The Financial Conduct Authority’s (“FCA”) impending Consumer Duty has been high on the agenda for financial services firms since August 2022. The FCA set out some key milestones for firms to achieve in readiness for the Consumer Duty coming into force in July 2023. One milestone was for firms to have in place an implementation plan by the 31st of October 2022.
As part of its monitoring into how firms are preparing for the Consumer Duty, the FCA undertook reviews of some of the implementation plans firms produced and have published their insights.
What did the FCA find?
The FCA found that many of the plans they reviewed showed that firms have an understanding about the changes coming into force and are embracing the shift to focus on consumer outcomes.
However, the regulator did also identify plans that suggested some firms may be further behind in their thinking and planning for the Consumer Duty.
The FCA highlighted some key areas where firms should particularly focus their attention during their implementation;
Effective prioritisation
Firms should make sure they are prioritising appropriately, focusing on reducing the risk of poor consumer outcomes and assessing where they are likely to be furthest away from the requirements of the Consumer Duty.
Embedding the substantive requirements
In their review of implementation plans, the FCA found that some firms may have considered the requirements ‘superficially’ or are ‘over-confident’ that their existing policies and processes will be adequate. Firms should ensure that they are reviewing their products and services, communications and customer journeys to identify and make the changes needed to meet these new standards.
Working with other firms
Many firms will need to work with and share information with other firms in their distribution chains. This means that some firms may need to ensure that they are preparing to share information with other firms also implementing the Consumer Duty in a timely manner to enable the firms they work with to also implement any necessary changes.
Monitoring
The FCA found that not all plans clearly explained the data required to monitor compliance with the Consumer Duty. Some plans offered more limited detail of firms’ in-depth consideration of their data requirements under the Consumer Duty and how they will source, package, monitor, govern, and act upon these.
In some cases, firms where merely ‘repacking’ their current data and management information (“MI”) strategies and where not fully considering the gaps or the outcomes it is intended to monitor. Additionally, in some plans there appeared to be limited consideration of how firms will monitor outcomes for different groups of customers, including those in vulnerable circumstances.
Summary
The FCA will continue to engage with firms during the implementation of the Consumer Duty. The FCA have indicated that they will shortly send a survey to a sample of firms to assist in their understanding of the progress they are making in implementing the Consumer Duty.
Firms must ensure that they are considering the intended outcomes of the Consumer Duty fully when implementing the changes being brought in.
We have been working with firms to assist with their implementation of the Consumer Duty. You can read previous publications we have produced on the Consumer Duty here.