In the recent webinar by FourthLine, Protecht, and the FCA, we explored "Consumer Duty Insights from the FCA" and shared practical suggestions on "Transforming Compliance into Day 2 Action".
Watch a recording of the full webinar here>
Martyn Saville, Manager in the FCA's Consumer Duty Delivery Team, was generous in providing valuable information regarding the mandatory Board Reports. He explained the importance of reflecting each firm's specific operating context in the Consumer Duty Board Report. He outlined components that firms should incorporate into the Board Report to align with Consumer Duty regulation.
Key Takeaways from the FCA:
No Standard Template:
The FCA has intentionally not provided a specific template for Board Reports. This approach allows for proportionality, recognising that the length, format, and detail of the report will vary based on the firm's size, business activities, and impact on consumer outcomes.
Tailored to Individual Firms:
Reports should be customised to fit the individual firm’s context. Smaller firms with focused product offerings and limited interaction with the FCA will produce different reports compared to larger firms with extensive customer bases and more frequent regulatory contact.
Reflective Assessment:
Reports should be customised to fit the individual firm’s context. For example, smaller firms with focused product offerings and those firms with a limited customer base or offering ‘vanilla’ products will produce different reports compared to larger firms or those offering more complex products.
Evidence-Based Approach:
Firms must evidence that they have considered good outcomes for consumers, including diverse customer needs, target markets, and customers with characteristics of vulnerability. This evidence should span the entire product lifecycle, from design to customer service and exit strategies.
Data-Driven Metrics:
The report needs to be underpinned with data. Sensible metrics and measures should form a baseline to track progress. Firms should show their current status, set out their forward-looking plan, and the steps they are taking to improve. Data helps tell the story of the firm’s development and compliance efforts.
Action Plans for Non-Compliance:
If a firm is not yet fully compliant with the Consumer Duty, this should be flagged in the report. Firms need to outline action plans to achieve compliance. This is an opportunity for firms to proactively address shortcomings rather than hoping issues will be resolved on their own.
FCA’s Review and Monitoring:
Starting in July, the FCA will review a wide sample of firms' Board Reports across multiple sectors. The FCA will look at the data firms use to evidence outcomes and how effectively the board has scrutinised the firm’s performance. This review will lead to the publication of good practices and areas for improvement.
Ongoing Conversations and Data Use:
Consumer Duty will be a recurring theme in all retail-focused conversations between the FCA and firms. The FCA will be active in monitoring, conducting ad-hoc information requests, and utilising data received from firms.
Benefits of Compliance:
Proper embedding of the Consumer Duty can drive innovation, healthy competition, and growth. Firms prioritising good consumer outcomes can expect improved customer attraction and increased customer loyalty. The FCA encourages firms to compete based on delivering positive consumer outcomes.
Continuous Improvement:
The FCA's overarching message is that compliance with the Consumer Duty is not a one-time effort. Firms should continuously embed practices that deliver good outcomes, driving cultural change within the industry to benefit consumers and firms alike.
In Conclusion
The FCA's insights provide a clear roadmap for regulated firms to navigate Consumer Duty requirements. Tailoring Board Reports to their specific context, using data-driven metrics, and proactively addressing compliance gaps, will help firms to meet regulatory expectations.
The FCA's focus on transparency and ongoing improvement underscores the importance of this initiative in fostering a healthier financial services sector.
