Providers have warned the advice industry about "how seriously" the regulator seems to be taking the incoming consumer duty after the regulator said some firms' plans to implement the duty were "superficial" and over-confident".
Today (January 25), the FCA shared its findings on how larger firms have been planning for the duty and while it did find examples of good practice, it also found a myriad of shortcomings.
Bad practice cited in the review included little explanation of tangible action, a reliance on repackaged data, a lack of information sharing between firms, poor prioritisation such as "unclear" timelines, and a complacency about past improvements.
The regulator soon intends to target engagement with smaller firms to check in on their plans for the duty too.
Quilter's head of proposition specialists, Roddy Munro, said the multi-firm review from the FCA "highlights just how seriously the regulator is taking the new consumer duty".
He added: "It is a helpful document in that it not only sets out where improvements in implementation plans can be made, but also what is currently being assessed as best practice and where the industry needs to be setting its sights.
"Time is ticking in terms of getting processes and actions in place and this review highlights that as an industry we cannot take our foot off the gas."
The consumer duty, set to come into force on July 31, 2023, requires firms to match products and services to consumers more effectively, ensure the price and value of these products are fair, to actively avoid customer detriment - ie, "foreseeable harm", and to change their cultures in line with this new regulation.
Munro warned that the industry cannot look at price in isolation, but as part of the wider picture when evidencing value to clients.
"This duty, therefore, presses home the point of having quality data collection for each product and service and ensuring the correct metrics are in place in order to remain compliant. We cannot rest on our laurels that we do much of this already."
While the FCA has not been overly prescriptive in what it is expecting, Munro said this should not be confused with a lack of certainty from the regulator.
"Indeed, detail and accountability are key. The regulator has flagged today that you must be clear about who is leading the programme, with clear timelines and information on how the duty will be embedded within company culture.
"We have moved to an era of outcome-based regulation and as such providers and advisers need to take what they believe are the necessary steps to evidence good customer outcomes and fair value. This means doing a thorough gap analysis of the products and services you offer, assessing your client communications and creating a customer centric culture within your business."