The Financial Conduct Authority's Consumer Duty Act will have a far-reaching impact on product manufacturing and distribution, customer communications and servicing in particular. However, there will in reality be very few areas of business that it will not touch in one way or another.
It is therefore going to be vital that firms have the right level of compliance and oversight in place to ensure the regulations are considered across business lines, products and legal entities.
There will need to be a level of consistency in application throughout a business, while also recognising the need for proportionality relating to the size, complexity and risk inherent in different areas.
Compliance with consumer duty will not be a binary choice based on a clear set of requirements, it will only be achieved through the overall culture of the firm being aligned to the high-level principles and focusing on the customer outcomes.
That cultural shift within businesses will need to be supported by the correct governance and controls that can find where there may be an issue, or room for improvement, in certain areas.
So what does this mean in practice for compliance teams, and those responsible for overseeing the activities of the firm?
Increasing the compliance scope
Ultimately, all activities that can have an impact on retail customers are now subject to the consumer duty. There will be few areas within most firms that escape the new rules completely.
Compliance will need to review how all areas are currently overseen and adapt accordingly. Are those areas, such as product manufacturing and distribution, IT and change management, all aligned to the principle of customer outcomes in everything they do?
It is possible that more activities across the business will come under the scope of the regulatory framework, or that activities will need to be overseen with a different focus on the customer.
At the heart of this oversight will be those measures and metrics, some of which will increase in importance. Compliance will need to define and monitor the metrics relating to service-level agreements and customer communication channel usage, which they may have only previously been aware of at the highest level.
Change the mindset
The governance by principle that consumer duty looks to extend will mean that the ways and means of ensuring compliance will need to shift as well. Firms will need to challenge themselves on their existing practices – some activities that are currently accepted may not be delivering the right outcomes for customers when critically assessed.
Compliance will play a vital role in doing this, and their voices will need to be heard within businesses.
A true compliance function, acting as an independent voice within the business, will provide an important perspective.
Compliance will need to challenge existing norms. They will also need to have a perspective on how the various rules will overlap and be open to new ways to overcoming challenges.
Compliance will need to work with the business, forging a culture that encourages innovation to support the customer’s best interests.