The latest FCA update on Consumer Duty: Summary

The FCA has published an update on its review of fixed supervision implementation plans for financial services firms. This update provides useful insights into the FCA’s key focus areas and gives some examples of best practice.

Key findings show that while some organisations are making good headway, there are still many who haven’t completed Consumer Duty implementation plans and, therefore, risk falling behind the proposed enforcement date on 31st July 2023 for existing products and services and new for 2024.

This report is designed to support firms with best practice and should be used by firms to create robust, achievable standards that meet the standards.

Here’s a summary of everything financial firms need to know.

1. Consumer Duty focuses

The FCA’s review focused on understanding existing approaches through several lenses, to establish the following factors:

• Firms’ approach to governance and arrangements for ongoing oversight of their implementation work.
• The deliverability of firms’ plans, and their ability to meet the implementation deadline.
• Assessing firms’ understanding of, and engagement with, third party providers where firms are dependent on third parties to implement their plans.
• How effectively plans address the substantive requirements of the Duty, as set out in our final rules and guidance. This includes the four outcome areas: products and services, price and value, consumer understanding and consumer support.
• Firms’ data strategies to ensure they will be able to identify, monitor, evidence and stand behind the outcomes their customers experience.
• Firms’ culture and people strategies to ensure their business will be focused on delivering good outcomes for consumers and that all staff understand their responsibilities under the Duty.

2. The Findings

Positively, the four outcomes seem to be effectively guiding organisations in the right direction.

Most high-level plans are demonstrating a considered understanding of the requirements and a proactive approach. However, the FCA has identified that some firms are further behind in their planning, risking not having the strategy embedded in time.

To support the next phase for firms, the FCA has recommended three clear focuses:

Prioritising the right areas

Firms should ensure they are prioritising effectively, with a focus on the areas that will make the biggest impact on outcomes for consumers.

The FCA saw some firms prioritising some deliverables with no clear justification. The FCA wants to see firms making considered assessments to prioritise focus areas, ensuring they’re concentrating efforts where consumer wellbeing is at risk.

Trailight’s team can help you create your digital systemisation plan based on these requirements. We can support you to implement capabilities, workflows, and frameworks to complete Consumer Duty on schedule.

Embedding the substantive requirements

The FCA saw some plans where firms may have considered the requirements superficially, and unfortunately, may have been overconfident on their existing policies and practice.

Conversely, they want to see firms that have considered the requirements and reviewed levels of consumer understanding, as well as customer journeys, and make necessary amendments to those.

With our individual regulatory compliance platform, we can ensure you implement the specific tasks, labels, reasonable steps, and responsibilities to feed into your wider strategic plan. The digital footprint will allow you to identify and review progress towards your requirements.

Working well with other firms

The FCA discovered that some plans had little focus on actions around engaging with other firms regarding exchange of information. Sharing knowledge with others in the distribution chain is encouraged to support best practice learnings.

Keep an eye out for the FCA survey to help organisations understand their progress.

3. Good practice advice

Going forwards, firms should take these best practice examples to heart and consider carefully how to develop approaches.

Appoint a Consumer Duty champion

Firms, senior managers and boards will be held accountable for delivering good outcomes. Firms should assign a champion role, or multiple, depending on the organisational structure, to support the development of the Duty and its management.

The executives in this role – and board level staff – are expected to challenge decisions and govern Duty implementation regularly, especially for audit and risk functions. To do so, the FCA recommend enabling these individuals to engage, communicate and coordinate with other relevant teams effectively, for in-person processes and in technology systems.

Trailight’s solution enables teams to effectively communicate across processes and clearly outlines the flow of responsibilities to ensure every individual remains accountable. Regular events can be implemented to ensure ongoing review and assurance of compliance.

Individual accountability to breed consumer culture

Firms must shift their culture to focus on consumer outcomes, by clearly communicating responsibilities and raising awareness amongst wider teams.

The FCA recognise best practice when firms go beyond cultural change by embedding the Consumer Duty into strategic areas of the organisation. Like values, approach, governance structures and even people performance frameworks. Mostly importantly, the FCA is interested in seeing tangible actions for creating cultural and strategic shifts, not just messaging on its importance.

Trailight supports teams and senior managers to understand their duties, and clearly outlining tasks and dependencies. By creating systemised frameworks and taking a human-centric approach, our platform enables a culture shift from the data up.

Monitor and evolve implementation plans

The FCA expect firms to create clear objectives, supported by resources, documentation, and workflows, in order to identify and implement the work required. In short, break down their implementation strategies into specific and achievable deliverables.

They recognise this is complex but recommend several ways of focusing on it including: the four objectives, key enablers, or business areas.

It’s also noted that implementation plans must be considered in other contexts like resource allocation, other strategic changes in the business and associated risks or necessary mitigations to ensure its success. It’s sensible to start by prioritising actions and perform a gap analysis of what’s missing.

Trailight allows organisations to continuously review and update their processes, supported by an underlying framework.

Evidence alignment with the four outcomes

This requirement has been established from early on, but the FCA noted some plans were clearer than others in how they met each requirement within the Duty.

The most effective plans worked to define ‘good outcomes’ in their own context and could therefore clearly show how they planned to deliver through their products and services, communications and support.

For next steps, organisations should focus on providing more granular evidence of their actions as they related to the substantive requirements and communicate explicitly about their approach to assessing gaps.

Trailight’s platform can clearly evidence new processes, tasks, and so on in a digital format to ensure organisations can evidence their improvements.

Establish specific metrics for outcomes

Understanding the data you need to measure the outcomes is just as important as implementing the right processes. Establishing specific metrics and consolidating these across the business is essential, so organisations must set out plans to ensure technology systems facilitate this new wealth of data capture.

Using Trailight, you can easily record individual conduct and actions, ensuring all compliant activity is evidencable. This can be captured and viewed at a granular level, or across individuals in the organisation, supporting a holistic governance perspective.

Empowering a transparent working world

Empowering a human-centric, accountable, and transparent approach to individual regulatory compliance is what we do. Trailight’s platform is purpose-built to transform how financial services manage their individual regulatory compliance, in the context of evolving regulation like the Consumer Duty.

Get in touch today to see how Trailight can support your implementation.