In the ever-evolving landscape of financial services, the Financial Conduct Authority’s (FCA) Consumer Duty represents a significant pivot towards enhanced consumer protection and responsibility. This week, the FCA’s director of insurance, Matt Brewis, underscored the ongoing journey towards full compliance, highlighting areas necessitating further progress. The message is clear: while strides have been made, the journey is far from over.
Consumer Duty: A paradigm shift in financial services
Introduced six months ago, Consumer Duty sets a new benchmark in consumer protection, demanding higher standards of care across the financial services industry. It is a comprehensive framework designed to ensure that consumer interests are at the heart of business operations. The Duty encompasses culture, governance, and monitoring as its core pillars, emphasising the importance of embedding these principles across all levels within firms.
Critical observations and guidance
Recent guidance from the FCA sheds light on both commendable practices and areas ripe for improvement, including:
– Ownership and responsibility: Successful firms are those where Consumer Duty is not siloed within compliance and risk departments but is owned across the organisation.
– Board and senior management engagement: There is a pressing need for deeper involvement from the board and senior managers to ensure that Consumer Duty transcends into all firm strategies and policies.
– Proactive measures: The FCA advocates for proactive measures to identify and rectify potential consumer harm.
– Data and monitoring: Firms must advance beyond repackaging existing data and genuinely innovate their data and monitoring strategies to truly understand and enhance consumer outcomes.
The cultural imperative
Consumer Duty is not just a regulatory requirement; it signifies a cultural shift within firms. This shift is built on four foundational drivers:
1. Purpose: Aligning organisational purpose with Consumer Duty.
2. Leadership: Fostering competent, accountable leadership that champions Consumer Duty.
3. People: Ensuring all employees are trained and incentivised to deliver positive consumer outcomes.
4. Governance: Establishing robust governance frameworks to identify and mitigate poor outcomes.
Ongoing regulatory priority
The FCA has woven Consumer Duty into the fabric of its regulatory approach, emphasising its importance across authorisations, policy development, supervision, and enforcement. This integration underscores the expectation for firms to continually assess, test, understand, and evidence good consumer outcomes as an ongoing duty, not a one-off task.
Implementation and compliance: A strategic approach
For compliance, risk, and business managers, the path to full Consumer Duty compliance is multifaceted. It requires a strategic approach that includes:
– Ensuring products and services are designed to meet consumer needs and perform as expected.
– Continuously testing and improving communication effectiveness.
– Embedding an understanding of Consumer Duty across all levels within the firm.
– Identifying key risks to delivering good consumer outcomes and implementing appropriate mitigations.
Leveraging technology for compliance
Manual monitoring and compliance processes are not only inefficient but also risky. Stand On The Right’s financial compliance software offers a robust solution, enabling firms to:
– Protect against legislation breaches with automated monitoring.
– Enhance user engagement through a user-friendly interface.
– Increase efficiency and productivity with tailored workflows and reduced manual labour.
– Maintain a comprehensive audit history, eliminating the need for paperwork.
As the regulations extend to apply to closed products and services from July 31, the urgency for firms to fully integrate and comply with Consumer Duty cannot be overstated. The FCA’s recently-announced proposal to name firms under investigation further amplifies the need for firms to proactively address compliance gaps.
In conclusion, the journey towards full Consumer Duty compliance is both a challenge and an opportunity for firms to redefine their approach to consumer protection. Stand On The Right stands ready to support your journey with our cutting-edge compliance software, ensuring you are not just compliant but ahead of the curve. For a demonstration of how it can transform your compliance and risk management processes, contact us today.
Together, let’s navigate the new era of Consumer Duty with confidence and compliance.