There is much discussion about the implications of the FCA’s Consumer Duty that firms will need to comply with by July 2023, albeit with a longer compliance date for closed products – through till July 2024. As the regulation is finalised this week, it’s now up to you to ensure that you have plans for implementation by October.
Consumer Duty Outcomes
Certainly in terms of the regulatory direction of travel there is nothing very new in the four consumer outcomes that the FCA has outlined. They are:
- Price and value
- Consumer support
- Products and services.
The Consumer Duty draws on a long line of regulatory initiatives that have signalled an increasing focus on consumer protections – RPPD, PROD, MIFID II and the Asset Management Market Study remedies, not to mention various thematic reviews. All hammering home the FCA’s customer protection remit. Firms who are already complying fully with PROD3 (and COLL on assessment of value) will be deemed to comply with Consumer Duty requirements. The flipside is that firms falling short in these areas will also be failing the Consumer Duty litmus test.
Bringing customer voice into your business – it’s what we do
We were pioneers in championing the customer voice when we set up TWC almost a decade ago, and we have seen some progress since our formation. Many of the firms that we work with clearly put customers at the heart of their business. But trust in this critical industry continues to be undermined by failures in governance and oversight that ultimately impact customers and their long-term savings – British Steel pension transfers, London Capital & Finance, and the Woodford fund are all recent examples.
In a recent survey of our Wise Society members*, respondents considered financial services as only the 7th most trusted industry out of 10. Beating media, energy and the automotive industry, but falling behind healthcare, food, pharmaceuticals, technology, retail and entertainment. Furthermore, financial services ranks at the bottom of the pile on the latest Edelman barometer of trust.
By introducing an overarching Consumer Duty, the FCA are bringing a new tone and intent to the way they regulate firms – calling all financial services firms to account no matter how they interact with customers, no matter where they sit in the overly-complex value chain, and codifying more than a decade’s worth of regulation, commentary and review. There is a renewed focus on target market and distribution strategy. Considerations around fees extend across the value chain.
Responsibility and reporting
Arguably even more impactful is the shift in expectations around reporting – this will be huge for firms that have yet to embrace their obligations towards retail customers, but is likely to have significant repercussions right across the industry. Consumer Duty is going to replace RPPD and will be firmly embedded in the senior managers’ regime. Boards will be held responsible for assessing whether or not firms are delivering good outcomes.
Financial services firms will need to demonstrate their ongoing commitment to customers through every step of the relationship – design of products and services, setting fees and charges, ongoing management and support, and ensuring that customers understand the products and services they use.
After almost a decade of embedding customer voice into the industry, we are leaders in this field, and act as an expert witness for the FCA and the IA. Our track record proves our ability to assist wealth and asset management firms to deliver against these new requirements. Our purpose has always been to ensure that products and services are fair for consumers, and to support the industry to help their clients enjoy secure financial futures. Everything we do is underpinned by this ethos – whether running client councils or customer communities (at whatever wealth level), building segmentation models, testing products and services, or representing the customer voice on industry working groups.
We have built our business around customers – we can help you do the same – get in touch to find out more.
*total respondents =293