FCA Consumer Duty: Feedback on firms' implementation plans

FCA Consumer Duty: Feedback on firms’ implementation plans

The FCA has published its review into how firms are planning to implement the Consumer Duty and highlighted areas for focus

Key Takeaways

  • Understand the FCA’s views on the Consumer Duty implementation plans of large firms
  • Identify the key areas of Consumer Duty that the FCA believe firms should focus their attention on in the remaining period for implementation

With less than six months to go before the Consumer Duty comes into force, the FCA has published its review on how firms are planning to implement the Duty and highlighted areas for firms to focus upon.

In its final rules the FCA set out its expectations including finalised guidance around board approval of firms’ implementation plans by the end of October 2022. The FCA has now reviewed the implementation plans of around 60 of the largest firms (Fixed Firms) with dedicated FCA supervision teams and has shared a number of findings, which will be relevant to other firms looking to finalise their own implementation projects.

They have made a number of suggestions for firms, outlining good practices and also areas which required improvement:

  1. Governance and oversight

    They found that some plans gave little detail on the assignment of responsibilities for implementation of the programme within the firm, a lack of evidence of scrutiny by the governing body of the firm and a lack of timings for meeting milestones.
  1. Culture and people

      They found that plans were lacking in detail about how the Consumer Duty would be embedded in firms’ culture.
  1. Deliverability

    They found that some firms’ implementation plans still had gap analyses at an early stage and were unclear about the allocation of resources to ensure that the programme would be implemented in time.
  1. Third parties

    The Consumer Duty still applies to firms with a key role in delivering retail customer outcomes, even if the firm has no direct customer relationship itself (e.g. product manufacturers). In such circumstances, the role of third parties in the distribution chain is crucial. The FCA has set a milestone of end of April 2023 for manufacturers to complete all necessary reviews and to share information with distributors (Financial Advisers) to enable them to meet their obligations; Target Market Assessments.

    The FCA identified as good practice one firm’s approach of engaging in a series of face-to-face workshops with its key third party agents to design their approach to the Consumer Duty. Another firm had set a cross-outcome objective to work with its partners to ensure cooperation.
  1. The four outcomes

    In the FCA’s view the most effective plans in this area attempted to define good customer outcomes in the context of their business and considered how to deliver these through improvements to their products and services, communications and the support they provide.
  1. Data strategies

    The FCA found that not all plans clearly explained the data required to monitor compliance with the Consumer Duty and in some cases were basing their data strategy largely on repackaging existing data, rather than considering the types and granularity of data they will actually need to monitor and evidence the four outcomes effectively (see further reading below).
The FCA has also highlighted three key areas where firms should particularly focus their attention during the second half of the implementation period:
  1. Prioritisation

    Some plans failed to set out how the firm was prioritising implementation work ahead of other aspects. In essence where are the areas of most risk that the firm has identified and how are these being remedied ahead of the ‘nice to haves’?
  1. Embedding the substantive requirements

    The FCA urges firms to ensure they are making the changes needed and not being “over-confident that existing policies and processes will be adequate”. Firms should ensure that, when they are reviewing their products and services, communications and customer journeys, they identify and make the changes needed to meet the new standards.
  1. Working with other firms

    The FCA highlighted that some plans gave little focus to where firms may need to work and share information with other firms in the distribution chain. As a reminder, there is an interim milestone in April 2023 around sharing information between manufacturers and distributors (Financial Advisers).
The FCA notes that whilst some plans showed a good understanding of the Consumer Duty by firms, others suggested that firms might be further behind in their thinking and planning, which brings about a risk that the firm will fail to meet the implementation deadline of 31 July 2023.

Summary next steps for firms:

  1. Review the FCA findings and further develop their implementation plans and approach in line with the FCA good practice as required;
  2. Ensure prioritisation, making the changes needed, and ensure engagement with other firms is reflected in their plans;
  3. Engage with the FCA on the industry outreach it has planned (surveys, website updates and events, portfolio letters and supervisory engagement); and
  4. For larger firms, be prepared for the FCA to reach out to provide support to the board champion.

For more information and further reading:

Graham Finlay
Graham Finlay
Strategic and Technical Sales Manager

Graham works within the Strategic & Technical team at Columbia Threadneedle Investments. Graham has undertaken a variety of adviser focused roles since 2003. Over the last few years he has been responsible for developing and delivering presentations at seminars across the UK on a broad range of investment and financial planning related topics. Graham holds a number of industry qualifications, including the CFA Certificate in ESG Investing, Investment Management Certificate (IMC), Diploma in Investment Management (ESG) and has more than 20 years’ industry experience. Graham previously worked with both Edinburgh Fund Managers and Scottish Widows.

Graham Finlay
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