The Consumer Duty – how to thrive after implementation

The Consumer Duty has been live since July 2023, but the hard work is far from over. The reality is that getting Consumer Duty requirements over the line was only the starting point and now, financial services organisations need to work even harder to ensure these principles become part of the company’s DNA. 

Ahead of the Duty’s implementation, the FCA found that only 56% of retail financial services providers agreed or strongly agreed that its requirements were a high priority.  

Understandably, some organisations may be cynical about the true impact of the Duty, and for various reasons. On one hand, the previous Treating Consumers Fairly regulation was never effectively followed up. Then on the other, the sheer volume of regulatory change over recent years has been challenging and burdensome. As a result, some organisations may be tempted to simply go through the motions.  

But the Duty aims to address the fundamental culture of financial services and should therefore be taken more seriously now than ever. Wrapped into the entire world of accountability, conduct and SM&CR, the Duty will be closely monitored, and the regulator will challenge. It has made it clear that there will be repercussions for individuals and organisations alike who cannot evidence effective embedding and compliance. 

The Duty impacts many operational processes, from product development to people training and competence to reporting, so now is the time to identify priorities and begin preparing for the first annual review. 

Where to start actioning the Consumer Duty 

There is a lot to do in the next year, but starting with the absolutely fundamental changes and challenges will ensure you ready yourself when regulators come calling.  

Retail firms will see the biggest impacts  

Retail firms are heavily impacted by the Duty, especially advice firms where the need to train, monitor and adequately supervise the ongoing behaviours of staff in the front and supporting lines is not negotiable.  

This is where Trailight’s People Risk Management (PRM) capability can add value. For example, our existing clients are now revising their advice process standards, and the observation and advice checking tools they configure and use in PRM, to better focus in on the Consumer Duty and how that is being delivered from a consumer’s perspective. 

This in turn will be reflected in the reporting and data they need to extract to answer some of the key questions. The need to ensure that SM&CR process have been amended, improved and tailored to reinforce accountability for the Consumer Duty is also critical. This is where our Individual Accountability Regime (IAR) capability comes in too. 

Educating and managing your people  

The effectiveness of your Consumer Duty implementation will be demonstrated by your people’s behaviours. How should they be delivering the experiences outlined by the regulation? Training and competence frameworks and behavioural management will be essential. Then, from a senior manager perspective, defining explicit actions and responsibilities, as well as enabling them to monitor and manage their people, will ensure good outcomes are being governed.  

Creating a framework for ongoing assessment  

One of the biggest criticisms of SM&CR is that its promised impact on individual censure hasn’t yet manifested itself.  In contrast, regulators have made it very clear that there will be serious repercussions in the context of the Duty.  

To stress test the implementation and embedding of the Duty, the FCA have set out a requirement for a firm’s board, or equivalent governing body, to review and approve an assessment of whether the firm is delivering good outcomes for its customers in alignment with the Duty, at least annually.  

This is firms’ chance to evidence they are meeting requirements. Although it’s still early stages, organisations should be prepared to undertake an in-depth review which means establishing proper data collection and reporting frameworks now, so adherence to the principles can be assessed on an ongoing basis. The FCA expect this to be provided on request with the report and the management information that sits behind it. 

Equally important is the need to ensure this data is integrated. Siloed tools do not reflect the intention of the Duty to join up the customer journey or its cross-cutting rules.  

Tools like Trailight’s Individual Regulatory Compliance (IRC) platform will break down silos, create visibility across departments and entities, and bring all the Consumer Duty requirements together with your other regional requirements.  

Creating a top-down, bottom-up culture 

Firms have invested a lot of time, effort and money into getting ready, but there may be a temptation to loosen the grip now and forget the importance of ongoing management, monitoring and reviews.  

To avoid this from happening, the Consumer Duty needs to remain on the board’s agenda. Now more than ever, they need to weave governance into the company culture; to ensure that it’s not a burden, but a natural part of the company’s processes where there is active support for the role of the Consumer Duty Champion. This requires a mindset shift which will only be successful if it’s driven by the organisation’s leaders. 

From dedicating budget for compliance teams to adopting new technologies to support ongoing governance, this top-down approach will lead to bottom-up implementation. 

Download our summary of the FCA reminders and guide for post-implementation.