FCA Consumer Duty – Next Steps

How Firms Should Proceed

The FCA has publicly committed to take an assertive approach to the implementation of the new rules. With initial compliance deadline looming in the coming months, firms are now entering a critical period to ensure readiness to showcase the ability to deliver good customer outcomes. Whilst there are many factors to be considered the below section outlines some of those that are key for firms to focus on in the coming weeks and months.

Refinement of Submitted Plans

The plans that were required to be submitted by October 2022 should not be considered as finalised artifacts and should be subject to continued evolution and refinement up to and beyond the July 2023 deadline. Due to the tight submission deadline and the wide scope of the task at hand, many firms will have been unable to include the necessary level of detail. When iterating plans, firms should look to continue capturing lessons learnt from the work performed so far and integrate this into the planning.

Continuous Improvement of Outcomes

The implementation deadline for the rules should not be seen as final milestone. Instead, the Consumer Duty should be thought of as a continuous process extending beyond 31st July 2023 whereby firms need to adapt their approach to the four outcomes and ensure that they are robustly integrating them into their ways of working at all levels of the organisation. It will be important that this is considered within the planning of future resource requirements that are needed to ensure good outcomes.

Risk-Based Approach

Firms should be prioritising the allocation of time and resources by utilising a risk-based approach which takes into consideration:

• The complexity of the product and service provided;
• The target market for each product / service and the sophistication of its consumers;
• The nature of the role of the firm and the relationship with its customers.

Where possible firms should look to obtain data and derive intelligence to assess the inherent risk of products, services, communications, or journeys and identify the volume of occurrences. With support from subject matter experts the expected benefits from remediation can be determined, enabling the planning of resource supported by robust information.

Ongoing Monitoring

The FCA has emphasised the importance of firms performing ongoing monitoring to provide regular assurance that good outcomes are being achieved. There is an expectation for firms to use data not only to be able to identify shortcomings but also to explain why they have materialised, facilitating the implementation of improvements. Management must have access to data that is sufficiently detailed to identify disparities in outcomes for specific consumer groups but can also be aggregated to enable strategic decisions.

To meet the immediate deadlines many firms have implemented tactical technology solutions to meet the data, monitoring and reporting requirements. Due to the inherent challenges associated with the use of proxies: which are susceptible to inaccuracy and require manual processing to derive information, it is advisable that firms move swiftly to implement system architecture improvements. This should be considered in the larger context of the firms' strategic objectives for digital transformation to increase the long-term return on investment and seen as an opportunity to gain a competitive advantage by enabling firms to better understand their client base and deliver more suitable products.