The FCA’s forthcoming Consumer Duty will set a higher standard of care that firms should provide to consumers in retail financial markets. Final rules and guidance, published on 27 July 2022, extended the implementation period to 31 July 2023 for new and existing products and services. The Duty will have far reaching implications for the retail sector. For some firms, it will require a significant shift in culture and behaviours to meet the new, higher standard of conduct.
The overriding requirement in the Consumer Duty is that firms must act to deliver good outcomes for retail customers, including those with characteristics of vulnerability. The Duty defines the standards of conduct that firms must follow to deliver good outcomes for their customers – firms must act in good faith towards customers, avoid causing foreseeable harm and enable and support their customers to pursue their financial objectives.
The firm’s board will be responsible for assessing compliance with the Duty. Firms will have to monitor and regularly review customer outcomes and act where they identify risks to compliance with the Duty. The draft rules and guidance identify ‘four outcomes’ which serve as the key measure for gauging whether firms are delivering good outcomes. These are concerned with whether the firm’s:
- Products and services are designed to meet customers’ needs and are appropriately targeted
- Customers are receiving value for money
- Communication supports and enables understanding and informed decision making
- Standard of support meets the needs of customers over the product lifecycle.
The Consumer Duty reflects a clear shift in the FCA’s regulatory approach from rules-based compliance to an outcomes-focussed approach. The onus will be on firms to monitor, assess, understand and evidence how they are acting to deliver good outcomes. Firms will need to collect a broad range of data and information to give them the insights they need and produce management information to support compliance with the Duty. The change in the FCA’s approach aligns with its own transformation to becoming more data-led allowing for more timely market interventions before practices become entrenched.
How Mazars can help
Mazars has a dedicated team of conduct specialists to help firms prepare for the Consumer Duty. The team has extensive experience of helping firms to improve conduct, performing outcome assessments and giving independent assurance to Boards and Senior Managers.
We provide an independent viewpoint, review and make recommendations to build trust and confidence amongst key stakeholders so that a firm’s response to the Consumer Duty is geared to delivering good outcomes for customers. We can support in a number of areas including:
- Strategy and culture (culture assessments, business model alignment)
- Product governance (appropriateness of products and sales and marketing strategies, defined target markets, after sales monitoring and support)
- Fair value assessments (balanced judgements of value offered by products and services)
- Vulnerable customers (identification and continual monitoring)
- Outcomes testing (back book review, remediation and structured programmes)
- Training (Board, Senior Managers, Sales teams and others involved in retail customer work)
- Data and MI (evidencing outcomes, Board packs, demonstrating and evidencing compliance to FCA)
Get in touch
If you would like to speak with a member of our Financial Services team, please contact us or to submit Request for Proposal documents, use the link below.