Regulator highlights room for improvement in Consumer Duty implementation

The Financial Conduct Authority (FCA) has reviewed a selection of companies’ Consumer Duty implementation plans and highlighted several areas for improvement.

The review involved larger retail financial services firms with a dedicated supervision team at the FCA. The regulator supplemented these findings with observations from regular supervisory engagement with other firms. The review aims to give firms an idea of whether their plans are robust enough to meet the regulator’s expectations.

The FCA also provided a more detailed breakdown of the areas for improvement that firms should consider as they continue to progress with their implementation, included in the graphic at the end of this article.

Three focus areas

In reviewing approaches to implementing and embedding the Duty, the FCA considered a wide range of factors, from governance to culture, data, and third-party relationships. The review highlighted three areas that firms should consider as the implementation period progresses.

• Effective prioritisation - Some firms have prioritised certain aspects of their implementation over others, but their rationale is not always clear. Firms should prioritise areas with the highest risk of negative outcomes for consumers.
  
• Embedding substantive requirements - Some firms are relying too much on existing policies and frameworks, without identifying the changes they will need to make to their products, communications, and customer journeys to meet the new standards.
  
• Working with other firms - For many firms, delivering good outcomes will involve sharing information with others in the distribution chain. Some plans did not provide enough detail on how they planned to engage with other businesses to deliver good consumer outcomes.
  

The FCA also provided a more detailed breakdown of the areas for improvement that firms should consider as they continue to progress with their implementation, included in the graphic at the end of this article.

What now for financial firms?

This review proves that the FCA is serious about enforcing the Consumer Duty rules effectively and efficiently. Since the Duty is central to the consumer-centric stance of the FCA, they are now trying to provide as much guidance to firms as possible to ensure successful implementation.

Engagement between businesses and the FCA will continue, with more published guidance and advice expected as the implementation deadline approaches. But many firms face tangible challenges and are unsure how to align their implementation plans with what the regulators expect to see.

Improvement areas

Find out more in our webinar

Delta Capita will host an industry-informed webinar on 9th February 2023 to cover key questions and points that the FCA has highlighted. This includes how to gather metrics to evidence good customer outcomes, and how to deliver good outcomes to vulnerable customers. Register for the webinar here and help ensure your Consumer Duty plans are on track.