So now we are storming and concepts, ideas, and methodologies are coming out full force.
To take a leaf out of the regulator’s book, SimplyBiz’s starting point was to ask: 'If we were a distributor, what would we do?'
We used that initial foundation to not only create our ‘how to’ guidance, but also examples of providing practical application, some of which I am going to share with you below.
The duty is big; the finalised guidance is more than 50,000 words. So, start now, and create a comprehensive, robust, and achievable plan in the nine months you have until the July 2023 deadline.
As part of our support for firms, we designed a Gantt chart to help them make sure the duty is built and, as of October, it looks comfortable – it is not going to take up too much time each month as there is wriggle room. If you are reading this article in May 2023 and you have not started your preparations, then panic.
However, if you are reading this article when it was first published, you have just passed the first deadline of October 31.
You will have your implementation plan in place, and you have probably done a gap analysis, so you already know that the challenge ahead of you is rather large.
You have two things on your side: time and proportionality.
Proportionality is mentioned throughout FG22/5; because the duty is far reaching and will affect most of the firms within financial services, the regulator understands that the small guys will not have the resources or the business models that the big guys do. Proportionally, therefore, you should build your proposition around your business.
Yes, a business speak cliché I know, but:
Q: How do you eat an elephant?
A: Piece by piece.
And that is true of the consumer duty elephant, and this is where a well-designed implementation plan comes in. If you are using a Gantt chart, seriously over-engineer it, really go to town on it and make a good solid piece of work, covering each area in depth.
If you do that, and you follow it and take it seriously, then you will create a fantastic duty proposition.
Principle 12 supersedes Principle 6 and 7, the ones addressing treating customers fairly, and being clear, fair and not misleading, which means you should already have stuff on your hard-drive that can be repurposed to meet the outcomes.
As part of our project, we hunted through the standard example documents and identified dozens of useful documents that we could adapt to meet the duty’s requirements.
Consider a ‘collateral gap analysis’ and ask the question 'can I use this for the duty?', and you’ll avoid hopefully avoid doing things twice.
Getting all this down in a proposition document is a job in itself – how do you go about putting the duty in order? Consider something simple, like mirroring FG22/5 itself.
Organise the duty into six key strategies, each of which address specific areas. The first strategy deals with the high level requirements around Principle 12 and the cross-cutting rules. The next four strategies deal with the four outcomes and the last strategy focuses on monitoring and governance.
The aim is to identify each of the areas within the consumer duty and then to apply a logical order, which will enable robust execution and monitoring.
Strategy | Consumer duty area |
---|---|
Education and culture | The consumer principle and cross-cutting rules |
Distribution | Products and services outcome |
Value assessment | Price and value outcome |
Communication | Consumer understanding outcome |
Customer services | Consumer support outcome |
Monitoring and governance | Monitoring, reviewing and responsibilities |
The six strategies are further subdivided.
Consumer duty requirements | Explain what the regulator wants |
Meeting the consumer duty requirements | Explains how the firm will do it |
Additional collateral | Additional information or references |
Remember this is your business, and your consumer duty. The regulator is not prescriptive, so it is your choice how you build a proposition based on your processes, your business model, and your clients. If it looks and feels right, then it probably is.
We are in the storming phase, and I am sure more will come out of it. Soon this will be the norm, and then we can get on and perform.
Karl Dines is head of business consultancy at SimplyBiz