Critical next steps in preparing for consumer duty

At an individual level, senior managers will be accountable for delivering good consumer outcomes within their areas of responsibility, in line with the senior managers’ regime’s duty of responsibility and conduct rules – including new conduct rule six, which mirrors the new consumer principle.

It will be important for firms to clearly define what these requirements look like in practice and ensure senior managers and relevant certified staff are trained on their obligations in this regard.

Timing

The rules and guidance the FCA is introducing will come into force in a phased basis.

For new and existing products or services that are open to sale or renewal, the rules come into force on July 31 2023. For closed products or services, the rules come into force on July 31 2024.

Given the FCA’s proposed implementation dates, this means that all across the sector firms will quickly need to get to grips with these final rules and accompanying guidance in order to meet the FCA’s implementation deadline.

The FCA has included some challenging interim milestones that it expects firms to meet.

By October 31 2022 (within three months of the date of the policy statement), boards need to have agreed their implementation plans and be able to provide evidence they have scrutinised and challenged their firm’s plans to ensure they are deliverable and robust enough to meet the new standards.

Firms need to be aware that the FCA may ask them to provide their implementation plans, board papers and minutes to their supervisors as part of the FCA’s programme of pre-implementation work that has been trailed in the policy statement.

The next three months will be critical for firms to map out, agree and commence the necessary implementation activities.

By April 30 2023, manufacturers should aim to complete all reviews necessary to meet the four outcome rules for their existing open products and services.

This is so that by this date they can share with distributors the information necessary for them to meet their obligations under the consumer duty (with respect to price and value, and products and services outcomes, for example).

It will also mean that they can identify where changes need to be made to their existing open products and services to meet the consumer duty and implement remedies by the end of July 2023. As distributors of products, advisers may therefore have a short period of time to undertake their own assessments of fair value ahead of the July 2023 implementation date.

In view of these challenging interim milestones, we expect that manufacturers and distributors will have to work closely together to ensure they can be met in good time with oversight from their respective boards.