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The Consumer Duty Implementation Plan: delivering a cultural change

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The 31st October deadline for financial firms to finalise their Consumer Duty implementation plans is fast approaching. The Financial Conduct Authority (FCA) will look for evidence in your plans that you’ve aligned your overall direction with better consumer outcomes.

Many firms are still not prepared to comply with the new rules. A September 2022 survey from Moneyhub showed an alarming 56% of decision makers at FCA-regulated firms say their business is not prepared and does not currently have projects in place to become Consumer Duty compliant. This means that there is still significant work which needs to be done in order to comply with the regulation.

The regulators have made it clear that putting customers first is the focus of this regulation. Across the four outcomes of products, price, customer understanding and communications, firms should be thinking about the proactive steps that they can take to deliver positive customer outcomes. Shifting to this approach will require a change in the way that many firms have previously thought about their roles as manufacturers and distributors. This represents a big shift in a firms culture and way people across the organisation think.

Although people and culture are discussed separately in the regulation, they go hand-in-hand. Culture is broad and set at the top. But the Consumer Duty rules require changes in the way individual employees perform their daily roles too. Your firm should explain how you will ensure staff act accordingly. This includes showing that incentives like remuneration align with helping customers achieve good outcomes, and that performance measurement frameworks include upholding consumer duty principles as a key requirement.

Your implementation plan cannot ignore your firm’s cultural commitment to better customer outcomes. This will include, but not be limited to, establishing processes and governance for senior management to regularly review UK Consumer Duty outcomes and controls, designing and delivering staff training tailored to the role of their employees. For example, employees with client facing roles should undertake training to identify vulnerable customers and better understand how to deal with client complaints and identify vulnerability ‘trigger words’, and product governance training should be made compulsory for staff involved in product design.

Across both people and culture, firms are required to evidence how their behaviour is changing to support better customer outcomes. Levers such as building targeted data insights and MI as well as implementing technology enabled controls will go a long way to demonstrate Consumer Duty commitment to the regulator.

The Proportionality Clause

The FCA will expect you to take reasonable steps to help customers achieve positive outcomes. This means your obligations towards your customers depend on the nature of the products you sell; your customers’ characteristics; and your firm’s role in the distribution chain.

Businesses vary in size and capabilities. Larger firms offering more complex products will be expected to put more effort into supporting customers than smaller firms with simpler offerings. The guiding principle is to be proportionate. As the FCA puts it: “…a firm should apply the same standards and capabilities to delivering good customer outcomes as they do to generating sales and revenue in comparable areas.”

Firms can employ the principle of proportionality to define the scale of the changes required, but evidencing change is key.

The Challenging Timeline

After completing your implementation plans, your business will have less than a year to remediate any gaps identified current operating model, and ensure the new requirements are embedded in your processes and procedures. Executing against an implementation plan, especially the cultural changes, within a year presents a challenging timeline, as the impacts of these changes should be resulting in fundamental shifts in how certain areas of your business operate.

The organisations best positioned to meet the deadline will have a clear idea of how people and culture will be affected, and the scale of the changes required to align themselves with regulatory expectations.

How Delta Capita can help

Delta Capita’s UK Consumer Duty team comprises senior industry practitioners and former C-suite banking executives. These team members have been personally accountable for multiple FCA regulatory and conduct initiatives.

We support organisations in delivering the changes required to meet the requirements for the regulator across people, culture, technology, and processes. Whether you need help understanding what products will be affected; accounting for risks and dependencies; or embedding requirements in business as usual, our team will have delivered similar changes in the past and are currently helping other organisations with the same challenges.

To find out more about how we can support you, contact us and speak directly to one of our experts.

This blog was co-authored by; Gabriele Trevisan, Analyst, Nick Wilcock, Managing Principal, Gideon Ezra, Consultant, Nabeelah Begum, Senior Consultant and Grace Willacy, Analyst at Delta Capita.