Implementing UK Consumer Duty: Prioritisation, delivering real change, and teamwork are key

The FCA has published its findings from its review of the Consumer Duty implementation plans of around 60 of the largest retail financial services firms who have fixed FCA supervisory teams. It highlights effective prioritisation, substantive changes to comply with the Duty’s requirements, and collaboration with key third party providers in distribution chains as three areas for particular focus as the July 2023 implementation deadline approaches. Firms should consider the wider findings from the review, and develop their implementation plans and approach with an eye to the FCA’s good practice guidance. The spotlight on work within distribution chains is especially significant, given the additional 30 April 2023 deadline for manufacturers to complete all reviews necessary to meet the outcome rules for their existing open products and services, which they should share with distributors to meet their Duty obligations.

The FCA’s review found that many firms show they understand and embrace the shift to delivering good customer outcomes which the Duty will bring, and have established extensive programmes of work to comply with it properly. However, some firms are further behind in their planning, raising concerns that they may struggle to apply the Duty effectively once the rules are in force.

Top three areas for firms to focus on over the next six months

Over the remaining six months of the implementation period, the FCA wants firms to particularly focus on: 

  • Prioritising: Firms should make sure they are prioritising effectively, with a focus on the areas that will make the biggest impact on outcomes for consumers.  
  • Making the changes needed: The FCA urges firms to ensure they are making the changes needed so consumers receive communications they can understand, products and services that meet their needs and offer fair value, and they get the customer support they need, when they need it. The content of some plans suggested firms may have considered the Consumer Duty requirements superficially or are over-confident that their existing policies and processes will be adequate.  
  • Working with other firms: Firms need to share information and work closely with their commercial partners to make sure they are all delivering good customer outcomes. The FCA has found that some firms need to accelerate this work to implement the Duty on time.

Further findings on what good (and bad) implementation planning looks like

As well as ensuring a particular focus and providing challenge on the above three areas, when overseeing implementation firms’ boards and management bodies should also pay attention to wider points highlighted by the FCA’s review including:

  • Governance and oversight: Robust governance frameworks for implementation work, with clear executive accountability for delivery and on-going board, executive and audit and risk oversight, are important and should be properly established pre-implementation. While the FCA has not been prescriptive on the Consumer Duty champion role, as it wants firms to implement this in a way that is effective for their business, sharing the role across the entire board or executive is not what it intended. It is of the view that this will not be an effective approach given the extent that it is likely to dilute the role.
  • Culture and people: The FCA is looking for a clear people and training approach to ensure all staff understand their responsibilities under the Duty. Firms should have assessed how far their firm’s current purpose, culture and values do, or do not, align with the Duty, and set out tangible actions to ensure any necessary improvements are made.
  • Deliverability: Good practice in this area should include setting out key workstreams, with clear milestones that need to be reached to have a realistic prospect of meeting the implementation deadline. Delivery risks and internal and external dependencies (eg how the implementation work aligns with other ongoing change initiatives or strategic programmes) should be clearly set out, with mitigation strategies in place to tackle any issues. Any resourcing shortfalls (eg in technology) should be identified and addressed. The approach to prioritising implementation work should be based on an assessment of the potential for poor consumer outcomes.
  • Third parties: Firms should have a good understanding of implementation dependencies with key third party providers in their distribution chains and should allocate time in their plans for this work, including for engagement and exchange of information with those third parties.
  • The four outcomes: Firms need to engage with the substantive requirements of the Duty and consider what these mean for their businesses and the changes they are likely to need to make. Ideally, plans should define good customer outcomes in the context of their business and consider how to deliver these through improvements to their products and services, communications and the support they provide. This includes how to build on and uplift existing frameworks around product governance, product value assessments and the clarity of communications, as appropriate.

The FCA warns that if firms are behind in their thinking about how exactly to conduct their reviews and gap analyses of products, services, communications and customer journeys against the Duty outcomes, or how they will amend and uplift existing assessment frameworks to meet the Duty standard, they risk being behind in their planning of how long such exercises are likely to take. 

  • Data strategies: As well as considering the consumer outcomes they are aiming to deliver, firms should also consider the data they need to measure and monitor the delivery of these outcomes. Simply repackaging or supplementing existing data will not be sufficient to ensure that firms can monitor and evidence outcomes for different groups of customers - including those in vulnerable circumstances - under the Duty in an effective manner. The FCA notes that, in addition to shorter-term solutions, some firms in the review set out longer-term strategic aims to advance the functionality of their systems and data collection.

Next steps

In the approach to the July 2023 implementation deadline for new and existing products and services, the FCA will:

  • Continue to engage with fixed firms where it has questions about their plans or approach, and to monitor the progress they are making in embedding the Duty. It will also be working with and supporting board champions at some larger firms.
  • Write to firms in the next few weeks, highlighting key expectations in relation to implementation of the Duty and some of the key risks and consumer harms that need to be addressed. These letters will be published on the FCA website.  
  • Issue a survey to over 600 mostly small and medium-sized firms to understand the progress they are making in implementing the Duty. It will also carry out targeted engagement with smaller firms.

The FCA’s programme of communications on the Duty will continue, for example, with further updates to its dedicated webpages and a series of regional in-person events for specific groups of small and medium-sized firms.

The next deadline is 30 April 2023, by which time manufacturers must have completed all the reviews necessary to meet the outcome rules for their existing open products and services.

If you would like to know more about the Hogan Lovells Financial Services team and how we can help you deliver or implement your plans, please visit our Consumer Duty hub.



Authored by Virginia Montgomery.


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