Speaking at Pimfa’s consumer duty conference today (January 31), Therese Chambers, director of consumer investments at the FCA, warned firms they should not consider the duty to be a “re-expression of treating customers fairly".
Chambers urged firms to recognise the purpose behind the duty is to create a fundamental cultural change across firms that is led from the top and filters across the whole organisation.
“The consumer duty is a watershed moment and a key priority for the FCA, we are looking for a fundamental change in firms’ approaches to ensure the best client outcomes, not just technical compliance,” Chambers said.
She told delegates that the duty is a substantial uplift in consumer standards and rules from July 2023.
It will require firms to document and evidence consumer outcomes, which the FCA hopes will help firms review and make further improvements for their clients in the future.
“This is a step change and needs to be treated as such,” she said.
Chambers also said that the FCA had reviewed the implementation plans of several firms and suggested that some of those plans - particularly those of larger firms - were overly simplistic and optimistic about their ability to comply with the consumer duty by the deadline.
She said firms needed to ensure they were setting effective priorities and looking to reduce risk and assessing where they were likely to be furthest away from good consumer outcomes, so they can “focus on where the biggest gaps are and try to fix them first”.
Another area the FCA highlighted where firms needed to pay more attention to was in their data strategies and the need for system changes.
Chambers said it had become clear from the FCA’s review of some firms’ implementation plans that they had not paid enough attention to the impact of third-party suppliers on consumer outcomes and it had seen evidence of generic approaches to pricing.
She warned that firms needed to take a first principles approach to pricing and charges for products and services to ensure they were demonstrating fair value and that the FCA expected “to see changes in charging models as a result”.
“The consumer duty is central to the FCA's own innovation and part of their strategy to rebuild consumer trust and confidence over the next three years,” she said.
“We regard the consumer duty as the tool that will drive that change."
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