With six months to go before the Consumer Duty comes into force, the Financial Conduct Authority (FCA) has warned that some firms are falling behind in their plans to implement the Duty.
Having reviewed a sample of implementation plans the regulator found that many firms understand and are embracing the shift to delivering good customer outcomes, which the Duty will bring, and have already established extensive programmes of work to comply with it properly.
However, it also found that some firms are further behind in their planning, so there is a risk that they may struggle to apply the Duty effectively once the rules come into force.
Sheldon Mills, executive director of consumers and competition at the FCA, said: “The Consumer Duty will bring about a step change in the way financial services firms treat their customers and we welcome the work firms are doing to implement it.
“Given the scale of the reform, we recognise that some firms need to make significant changes. For firms which are further behind in making the necessary changes, there is time to put that right and for them to show they are acting in the spirit of the new Duty.
“Firms will also see the benefits of the Duty, with increased trust in the sector, more flexibility to innovate and in time fewer rule changes.”
Roddy Munro, head of proposition specialists at Quilter, added: “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.
“Given the professionalisation of the advice industry in the last decade and an increasing focus on value, many will be in a good starting position. It is this value that is so important, and it should not be confused for price.
“Clients and their families will value different elements of advice at different points over their lifetimes. As such we 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 hasn’t been overly prescriptive in what it is expecting, 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.
“While these internal plans should be well advanced, it is necessary that providers and advisers do not silo themselves and leave themselves open to risk of third-party non-compliance. We all play different roles in the value chain and rely on a variety of suppliers and thus a collaborative approach is required to ensure we achieve good customer outcomes.
“Knowing who the product manufacturers are, how a product or service is distributed and who owns the client relationships, as well as what roles others play will be crucial to make the Consumer Duty the success we want it to be.”
