Consumer Duty is a key strategic focus for the FCA
New Consumer Duty (“CD”) rules have been launched by the FCA causing operational change in financial services organisations across the sector. Closely aligned with SM&CR while setting expectations for all staff, this proposal is shaped by one motivating factor: good consumer outcomes.
The FCA is reacting to its own concerns that firms are not putting their consumers first. Although consumer rights and protection have been priorities for some time, the FCA is putting in steps to formalise these expectations and ensure organisations are clearly evidencing good consumer outcomes. In particular, the onus has shifted from mitigating harm to actively pursuing positive outcomes for the consumer.
- Fair value: consumers receive fair prices and quality
- Suitability and treatment: consumers receive suitable products and services and receive good treatment
- Confidence: consumers have strong confidence and levels of participation in markets
- Access: diverse consumer needs are met
Some of the most notable additions and implications for SM&CR include:
- Individual Conduct Rule 6: You must act to deliver good outcomes for retail customers
- Individual Conduct Rule 4: You must pay due regard to the interests of customers and treat them fairly
- Senior Manager Conduct Rule 4: You must disclose any information of which the FCA or PRA would reasonably expect notice
- SM is responsible for compliance with the CD; and the expectation to have a Board level CD Champion
Operationalising the Consumer Duty and SM&CR changes
Since 2019, all firms have been spending a huge amount of time enhancing processes around the consumer. Organisations must prove they are taking their duties seriously and effectively implementing this across training, process and data practices. Most importantly, they must do so through a true lens of consumer outcomes.
As these themes are not new, only being reemphasised with greater rigour and a renewed focus in favour of the consumer, it shouldn’t be a challenge to gather this data. What organisations may be struggling with, however, is the systemisation of these requirements.
The Consumer Duty raises the bar without yet detailing exactly how organisations should rise to the challenge. Expectations have been outlined, plus the latest speech from Emily Shepperd iterates how the Duty is rooted in culture, encouraging senior managers to foster purposefully positive practices and wanting to see a company-wide mindset for good governance.
At the same time, advice on all sides is to begin evaluating and revising their frameworks as they wait for this clarity. Certainly, there are some specific actions already that can be taken to adapt SM&CR frameworks accordingly.
The Consumer Duty and the Trailight platform
The Trailight platform can help you structure Consumer Duty through existing, but flexible, frameworks. Organisation can use this solution to digitise their requirements in a systematic way – from delegations to responsibilities. With the ability to create a complete digital footprint of activity, they can prove their compliance, demonstrate good consumer activity, and mitigate regulatory risk.
This extends far beyond SM&CR, enabling organisations to manage the entire governance process with transparency. With a human-centric approach, we’ll enable you to look past the organisation at both individual behaviour and consumer impact.
Here is how Trailight can help you with some of the key Consumer Duty challenges and updating your SM&CR framework:
Accountability & responsibility
Regulators expect firms to include accountability and responsibility for the Consumer Duty in their processes. This is relatively flexible in definition, with some firms assigning this to the CEO and others placing it with various Senior Managers across the organisation. Nevertheless, now these expectations are linked to specific people rather than sitting as a general concept, organisations need to support their individuals to meet their requirements.
Actions firms can take now is to review and update their Statements of Responsibility, and any resulting Management Responsibilities Maps.
Whether it’s a number of individuals or one, our system can help you accommodate Senior Managers’ requirements with our existing reasonable steps functionality. Users can map reasonable steps and additionally use the attestations feature to acknowledge regulatory requirements, policy enactment and adherence.
- Reasonable Steps
- Review process
- SoRs and MRMs
Individual conduct rule
The FCA is introducing a new individual conduct rule which requires all relevant staff to deliver good outcomes for consumers under the scope of the Consumer Duty. This means all firms, whether they are subject to SM&CR or not, will need to provide the proper support for their individuals to achieve this.
This will require a thorough update of SM&CR policies, ensuring any reference to Conduct Rule procedures, assessment policies, guidance, forms, and committee information. Equally, any employee handbooks may need updates to Codes of Conduct if relevant.
The platform has a built-in conduct breach capability which helps with key conduct procedures, such as attestations. The system is also designed to help organisations provide evidence in a more organic way that aligns with their ways of working and structure. Plus, any conduct rule breach will be clearly flagged so individuals can identify and remedy these more quickly.
- Conduct breach
- Digital versioning and audit
Firms who have staff that must interact directly with the consumer – such as advisers and customer support staff – will need to re-evaluate their competence management processes, measures and supervision in line with these changes.
In terms of next steps, firms should ensure their T&C frameworks and schemes are up to scratch in order to support staff to attain and maintain appropriate knowledge, qualifications, skills and behaviours to deliver great consumer outcomes. This includes putting MI reporting and metrics for senior managers in place so they can effectively monitor activity surrounding Consumer Duty and its outputs.
Retraining will also be important. Both senior managers need to be updated and aware of Consumer Duty rules, and staff need to be provided appropriate training.
Firms can use call monitoring, complaints data or other recorded observations to identify gaps or risks in people’s performance. Trailight’s PRM function helps you manage your people risk and compliance by implementing monitoring and reporting, automated event lifecycles, data insights and more. With Trailight’s PRM capability, you create flexible policy frameworks and systemised competency measures.
- KPI management
- CPD plans
- Supervisory assessments
- Policy manager
Financial services firms are now required to assess the value of their products and services as they are sold to retail consumers. Not only is this hard to define, but it’s an extensive task with a short deadline.
Without strict guidelines once again, organisations should focus on recording as much relevant data as possible and evidencing their conclusions. This will require comprehensive record keeping.
Trailight can give you a clear picture of both historical and existing data. Organisations can store and evidence data against prescribed rules, then easily navigate to a specific point in time of activity.
Implement and evidence Consumer Duty with Trailight
We still don’t know how the Consumer Duty will be regulated and supervised, but our system can help you organise your data, your activity, and your people, so you can start taking steps in the right direction.