Challenges facing firms at this stage
The aforementioned scope of duty will be one of the most significant challenges facing firms, applying to each element of the value chain for products and services sold to retail customers. Extensive oversight will be needed to ensure the regulations are considered across all relevant products, business lines and legal entities.
However, it is important for firms to consider how the duty is applied appropriately and proportionately to each function, depending on its influence on the design, operation and distribution of relevant products and services.
A one-size-fits all approach will not be effective, but equally, the process should not become siloed, with individual functions taking their own approach.
Here lies the value of the consumer duty board champion. To ensure that good outcomes for consumers are central to a firm’s culture, strategy and business objectives, the FCA expects firms to have a champion at board (or equivalent governing body) level.
With an established individual in place, the duty should not only be discussed in a meaningful way, but also implemented in a co-ordinated fashion with direction from an individual, or group of individuals, that have oversight of the process across all relevant products, business lines and legal entities.
Beyond scope, firms must be cognisant of the fact that consumer duty does not represent a single piece of regulatory change and that in itself will be a challenge.
Compliance will not be a box-ticking process and the impact of the duty must be considered in the broader context of business strategy, operating models and the extent to which existing frameworks, technology and data can be routinely improved.
The bottom line is that the FCA is looking for firms to build a customer-centric culture through a process of continuous improvement to ensure that the interests of the end-consumer are always put first, and this must remain at the forefront of senior management’s minds as they hit the ground running with consumer duty.
Benefits stemming from cultural change
It has already been established that the new duty will drive a change in culture at firms, with the FCA expecting businesses to step up and put consumers front and centre or have senior managers held accountable.
Accounting for a customer’s circumstances has always been the regulator’s expectation of firms, so those that have already been placing importance on duty of care for the end consumer should see the process of compliance as an opportunity to bolster good practices and culture instead of creating it from scratch.
Deriving value from meaningful data
Collecting meaningful data forms a critical part of consumer duty, with the FCA evaluating the success of its proposals by using data from a variety of sources, including firm management information.
