Introduction:
During a webinar on December 6, 2023, the Financial Conduct Authority (FCA) unveiled key insights into the progress of in-scope firms towards achieving Consumer Duty compliance and outlined the necessary future actions.
This regulatory initiative is far from a 'once and done' exercise, and firms need to adopt an approach that ensures continual compliance. Let's delve into the key takeaways from the session.
Ongoing Duty and Key Focus Areas:
The central message of the webinar was clear – the Consumer Duty is a continuous obligation. The FCA emphasised the importance of using new data to measure and monitor outcomes, with a focus on delivering appropriate results. Key areas for firms to concentrate on included overhauling communications for improved customer clarity, ensuring product suitability, and handling complaints fairly while learning from root causes.
Closed Products: A Special Focus
The FCA underlined the significance of closed products, those not available to new customers, stressing that the Consumer Duty is just as crucial in this context. Despite the absence of a target market, firms are expected to uphold the duty. Challenges, especially in the life insurance sector, were acknowledged, such as the lack of fair value and the complexities of updating outdated policy clauses.
Annual Board Reports: An Integral Review Process
Boards are mandated to conduct an annual review to ensure firms deliver positive outcomes for customers. This assessment includes monitoring products and services for expected outcomes aligned with the Consumer Duty. Boards must agree on actions to address identified risks and potential changes to the firm's future business strategy before signing off on subsequent reports.
Progress and Challenges:
The FCA acknowledged progress in areas such as increased accessibility for hearing and visually impaired customers and a focus on customers with low financial literacy. However, concerns were raised about a lack of action in response to the cost-of-living crisis.
The FCA stressed the need for a nuanced approach, especially in addressing vulnerabilities, and expressed disappointment with a blanket approach to age and vulnerability.
Proactive Steps for Smaller Firms:
Smaller firms with simpler products were encouraged to take a proportionate approach to implementing the Consumer Duty. The FCA recognised the diversity in the market and emphasised that compliance strategies should be tailored to the size and complexity of each firm.
Conclusion:
The FCA's webinar on December 6, 2023, provided invaluable insights into their expectation and current state of the Consumer Duty.
In-scope firms must prioritise measuring outcomes, improving communications, ensuring product suitability, and handling complaints effectively. As the 31 July 2024 deadline approaches, firms must align with the FCA's expectations and contribute to a financial landscape that prioritises consumer welfare. You can watch the webinar here>
