With one month to go before the consumer duty comes into force, the Financial Conduct Authority is calling on firms to make sure they are on track to meet the deadline.
In an update this week (June 28), the FCA highlighted key questions from the finalised guidance for firms to keep asking themselves.
It said this should help firms reflect on their implementation of the duty and identify gaps or areas for improvement.
The questions were:
Nisha Arora, director, cross-cutting policy and strategy at the FCA, said: “The consumer duty presents a real opportunity for financial services.
“Not only do we expect the duty to deliver higher standards and reduce consumer harm, but it should also increase trust and confidence, boost competition and innovation and mean firms face fewer rule changes in the future.”
The City watchdog also published results from a survey of smaller firms, which looked at firms’ preparedness in some of the sectors where the FCA might have expected firms to be less engaged and prepared.
The survey found that 64 per cent of firms surveyed said they would be fully compliant by the deadline and a further 23 per cent said they would comply with most requirements by the deadline, but would still have some work to do.
Some 7 per cent of firms said they would still have significant work to do after the deadline or had not started work on the duty.
The FCA said the results gave a snapshot of firms’ preparedness three months before the July implementation deadline and showed that most firms in these sectors were engaged, understood the requirements of the duty, and were on track with implementation.
However, a small minority still had significant work to do and needed to seriously accelerate their implementation work.
Arora said: “We are pleased by the progress most firms have made to be ready in time, but we are aware that some firms have more to do to meet the deadline.
“However well prepared a firm thinks it is, it’s crucial that its leaders are asking the right questions, such as the 10 key ones we are reminding them of today.
“This will make sure the firm is on track in implementing the duty.”
The FCA said it knows from its supervisory and engagement activity that many firms have already taken significant steps to accelerate their implementation work since this snapshot of firms’ progress was taken in March to early May.
“Once the duty is in force, we will prioritise the most serious breaches and act swiftly where we see firms causing actual or potential harm to consumers,” Arora added.
Elsewhere, Bankhall was urging advisers to ensure they are fully ready for the forthcoming changes.
Linda Preston-Todd, client relationship director at Bankhall, shared some of the top questions currently being put to the team by advisers.
Bankhall said a good starting point is to have a standard list of questions to ask each client after they’ve engaged with their adviser.
For example: What were you recommended? Do you know what our costs are? Do you know what we are/aren’t able to offer you?
Every client’s needs will be different, but asking broad questions such as these will provide a means of drilling down into what someone took away from a conversation and provide peace of mind that everyone is on the same page.
It also said clients should be encouraged to view vulnerability as a spectrum of risk and explained that a key element to measuring fair value is setting out information such as how a service or product has been priced, why it has been set at that price, exactly what benefits the service is delivering and what the cost of delivering it is.
Preston-Todd said: “Consumer duty is the most significant regulatory change our industry has seen in over a decade.
“It’s imperative that adviser firms ensure they are 100 per cent ready by focusing their attention in the right areas in the run up to implementation.
“This might seem a daunting prospect as the clock ticks down, but there’s lots of support available and embracing the changes offers a great opportunity to ensure services and processes are delivering the best possible outcomes to customers.”
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