The closed book implementation deadline for Consumer Duty is 31 July 2024. The focus for both firms and the Financial Conduct Authority(FCA) is shifting from one-off implementation activity to the ongoing work required to ensure good customer outcomes are at the heart of business decisions.

What are the ongoing expectations of firms?

The FCA has made it clear that Consumer Duty is not a "once and done" exercise and firms should be continually challenging themselves on whether they really are delivering good outcomes for customers. As part of this assessment, firms may wish to revisit the implementation plans shared with the FCA back in October 2022 and challenge themselves as to whether their implementation effort has met their initial goals.

A lot of activity was required within relatively short timelines to meet the implementation deadline for open business last year. Prioritisation may have been necessary, with some 'nice to have' activities descoped to deliver in a pragmatic way, and a similar approach may yet be necessary for closed business ahead of the next deadline. Demonstrating that these activities have been re-evaluated post-implementation, and, where additive, have been incorporated into business plans, can help to demonstrate ongoing adherence with expectations of the Duty.

As the FCA pivots to a more data-driven approach, firms need to be confident that they're collecting appropriate data to evidence that customers are achieving good outcomes. This should be driven by monitoring practices. However, repackaging existing data is unlikely to be sufficient, with firms encouraged to challenge themselves as to what data is needed and to then build the necessary processes to capture these requirements. A recent FCA Consumer Duty webinar highlighted an example of complaints data only telling part of the story, with a deeper assessment required to help understand differences in outcomes experienced by different customer cohorts.

Many firms have a key dependency on outsourcers providing data to evidence delivery of good customer outcomes. Proportionate information sharing that allows firms to assess whether customer outcomes can be improved, without resulting in an additional cost to the end customer, is an area we expect may require some time to get right.

It's likely that monitoring data will play a key part in the annual Consumer Duty Board assessment, the first of which is due in July this year. The report has no set criteria from the FCA, allowing firms to be adaptive and reflect the nature of their own business, however, having clear quantitative metrics will support firms to objectively demonstrate how they have complied with the Duty.

What might change over time?

Technology already plays an important role in many areas of financial services. We're seeing a move to greater automation of Management Information (MI), dashboards, and real-time indicators as firms drive efficiencies and look to improve their processes. With this in mind, we would expect monitoring of all four of the Consumer Duty outcomes to evolve over time, including changes to Key Performance Indicators as practice evolves.

Firms should be constantly asking themselves whether their products remain suitable for their target market and respond to emerging trends that might indicate new sources of potential harm to consumers. Evidencing challenge as to whether products should be withdrawn, innovating existing products or introducing new products and services will need to become part of ongoing “business as usual” product review processes.

Advances in technology and shifting customer expectations mean that how firms interact with consumers looks increasingly different to when some products were initially written - for example with increasing use of e-mail notifications and even mobile apps. However, the most recent census shows that the proportion of people aged 65 years and over rose from just over 16% in 2011 to almost 19% in 2021. With an ageing population, careful consideration needs to be given to changes in how consumers want to access information and what information they may need, such as physical correspondence or access to offline support.

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Information provided to customers might also need to change emphasis as market conditions and alternative products evolve. Changes in the risk profile of investments  may impact customers’ financial objectives, particularly where the investment strategy has deviated significantly from the original marketing and ensuring this is well understood will be required to protect customers from foreseeable harm. Firms should also consider the information needs of any “orphaned” consumers, those who initially selected their product with the help of an advisor but where the firm or advisor has lost contact with the consumer.

Firms should think about how the demographics of their consumers are changing. Also, there may be concentrations of consumers within specific products or firm-wide to consider. Being more data-driven should also allow for better and quicker identification of potentially vulnerable consumers. This is particularly true of interactions with customer-facing employees, who are best placed to identify potential vulnerabilities. This will help to ensure vulnerable customers receive the additional due care they require.

Next steps for firms

As well as embedding practices as part of their Consumer Duty implementation, firms are expected to continually evolve their practice based on experience within their own company and that of others in the industry. The FCA has been clear that they will make use of the data from their Financial Lives survey to monitor customers experience and test the embeddedness of the Duty and expect firms to respond to actions set out in Dear CEO letters and other publications. Firms should monitor their own data and respond to their changing needs, ensuring that MI and dashboards remain relevant as industry practice develops over time.

Small firms are encouraged to bring in an external view for independent challenge on their processes. Independent external parties can also bring subject matter expertise and offer fresh ideas and insight into other market practices to enable continual improvement.

As firms produce their first annual Board assessment, they're likely to identify areas of pain or inefficiency within the process. There is likely to be a particular focus on the quality and availability of data, and the readiness of MI and dashboards to efficiently monitor consumer outcomes. New questions may arise that need to be considered or evidenced going forward, and new ideas may emerge. These may result in additional sprints of effort being required to deliver the necessary improvements.

How The Compliance Platform can support you

For a conversation on how we can support you with implementing the Consumer Duty requirements or what they mean for your business, please get in touch.

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