Mandated due to failing public confidence in retail financial services, the data the Financial Conduct Authority collects from firms will provide a view of the whole product life cycle and enable the FCA to stamp out poor practice before it becomes systemic.
The duty therefore represents a fundamental shift in the industry’s mindset, aiming to improve the culture of firms to ensure they focus on real-world consumer outcomes.
From these aims and objectives alone, it should be clear to firms with retail clients that the scope of proposals is significant. Preparing for implementation now, beyond the October 31 deadline, will require careful planning from the top-down.
Complying is as much a matter of data management as it is a cultural exercise.
Firms that follow and understand the FCA’s objective of becoming a more assertive and data-led regulator can get ahead.
Complying is as much a matter of data management as it is a cultural exercise, and those that recognise it as an opportunity to measure for themselves how they can deliver good consumer outcomes will turn management information requirements set out by the duty into a competitive advantage.
For example, the customer journey mapping exercise can be used to drive centralisation of the services provided and act as an opportunity to streamline the business.
As of the end of October, boards or equivalent management bodies should have agreed their implementation plans with evidence that they have scrutinised and challenged them to ensure plans are deliverable and robust to meet the new standards.
However, the real legwork starts now. By April 30 2023, manufacturers, or in other words investment firms that create, develop, issue and/or design financial instruments, must complete all the reviews necessary to meet the four outcome rules for their existing products and services, which are:
The duty’s renewed focus on customer interests and outcomes will need firms to consider compliance at every level of the organisational structure. So, with just over four months to go until the next deadline, firms – if not done already – must act swiftly to set up project teams across each business line tasked with benchmarking compliance against the new requirements and effecting a programme of change to address identified gaps.
To instil the sense of responsibility required to be successful in this process, C-suite buy-in and senior management accountability will be critical, with specific roles, including those overseeing adherence, documented in the senior managers’ statement of responsibilities.
On top of this, firms must develop and deliver regular training to staff on the consumer duty, which will be overseen, again, by senior management, cementing the crucial need for wholehearted involvement from these individuals in the process – it is not up to the compliance function alone.