How the consumer duty will affect advisers' day-to-day operations

In connection with the former, the FCA has issued updated guidance, through finalised guidance 22/5, which provides additional clarity on the data points that firms should consider in order to monitor customer outcomes to ensure that they are consistent with their obligations under the consumer duty.

Data insights

It should be possible to leverage and adapt existing touch-points with customers to assist, for example through customer feedback, focus groups or deep dives, but firms will need to challenge themselves as to whether new processes are needed, too.

For example, some firms will track drop-off rates and obtain other behavioural insights, but may not do so in ways that facilitate the interrogation of overall outcomes for customers and whether, for example, the firm’s services as a whole help customers achieve their financial objectives.

Although the application of the consumer duty to particular firms is, in general, influenced by an overarching proportionality principle, the updated guidance should be considered by advisers in full and then applied in light of a firm’s particular size, client base and the types of products and services provided to retail customers.

Clearly, firms with customers who have characteristics of vulnerability or protected characteristics will need to pay close attention to the ways in which information is obtained and processed. This is important, among other things, to ensure compliance with wider legal obligations, for example under data privacy and equalities legislation.

Distributors will need to reconsider the ways in which their communication channels support customers in their target market.

Again, firms should challenge themselves to consider the most appropriate data points for the services provided and the most appropriate method of obtaining that information against the backdrop of their customer base. Different approaches may be needed for different categories of customer.

It is also worth bearing in mind one overarching theme of the consumer duty, in terms of cultural change.

The FCA expects firms to deploy the strategies, technologies and systems in use across the business (for example, in product development or sales) in order to meet the requirements of the duty.

In this context, firms with sophisticated management information strategies and capabilities, which are used to generate customer acquisition, will be expected to deploy these tools and this experience towards monitoring outcomes, where appropriate.

Developing processes to meet the consumer understanding outcome

The new ‘consumer understanding outcome’ represents a reorientation of regulatory requirements around customer communications.

This is not simply an incremental development to principle seven of the FCA’s Principles for Businesses. It actually requires a whole new approach to the development and delivery of customer communication, including pre-contractual and contractual documentation.