The FCA has published a speech by Sheldon Mills, Executive Director of Consumers and Competition, that he made during a recent event hosted by KPMG. The speech focused on implementing the duty for closed products and services, and the progress firms have made to date regarding its implementation for open products and services.
We have summarised the key points from the speech below.
Progress to date for open products:
Mills emphasised the progress made by firms in meeting the Consumer Duty requirements for open products. For instance, companies are ensuring they provide tailored products and services to match the needs of individual customers, eliminating complicated terminology, and transitioning clients towards more standardised and cost-effective alternatives when deemed suitable.
The FCA has seen board-level leaders seriously considering what the Duty means for them culturally and operationally, and it has also seen some firms offering fairer value by increasing value received by savers, reducing fees and maximising customer benefits.
Mills referred to the FCA’s publication of the results from a survey of smaller firms, looking at their progress on implementation, and noted that the regulator was pleased to see significant progress since the last time small firms were surveyed.
However, he also noted that there is still much room for improvement. He gave a few examples:
- The FCA does not want to see firms waiting to see whether it will intervene to address an issue.
- Firms need to “get serious” about their data and not assume they can just repackage existing information.
- The Duty should be embedded across every firm at every level, with leadership from boards.
- Firms must ensure fair pricing and value across all products. While some progress has been made in reviewing fee structures, there's a need for more robust assessments backed by solid data and evidence.
- Vested rights, including fees and charges, require careful consideration. Firms may need to reassess these terms to ensure positive outcomes for consumers, balancing financial interests with consumer welfare.
As the July deadline for open products approaches, firms need a clear roadmap for compliance. Mills encouraged a risk-based prioritisation approach, focusing on areas of highest impact to consumers. Board reports play a crucial role in demonstrating firms' commitment to delivering good outcomes under the Consumer Duty.
Firms must also address challenges such as data gaps, fair value assessments, customer engagement, and vested rights to mitigate potential harm to consumers.
Looking Ahead:
Mills underscored the significance of the Consumer Duty in driving trust, innovation, and competitiveness in the UK's financial services sector. While challenges persist, the potential benefits of compliance are immense, including enhanced consumer trust, market integrity, and global competitiveness.
Conclusion:
Mills emphasised that the FCA will rely on data and metrics to guide their supervision and enforcement of the Duty, ensuring a focused approach. Firms are encouraged to prioritise based on risk assessment, identifying products or services with the potential for consumer harm.
