The Financial Conduct Authority (FCA) has been driving forward the regulations under the Consumer Duty, and the final guidance published in July sets down expectations not just for the companies it regulates but for themselves too.

The goal of Consumer Duty is to have companies focus on and provide good customer outcomes and strengthen support for customers, building on current principles to bring an assertive, data-driven approach to the products they regulate.

The impact of the FCA regulations to your company does not need to mean building processes from scratch. If you are currently meeting PROD or Principles 6 and 7, then you are part of the way there.  

We spoke to Freedom Finance's COO Andrew Fisher and their Director of Risk and Compliance, Nicola Matthias, on what businesses need to do to get ahead of this incoming regulatory change. 

Current practice

The FCA set a deadline of 31st October for ensuring that implementation plans are approved across the industry so that should be completed.  A gap analysis is the next logical place to start. What requirements do you already meet? What is common practice now, and where do you need to be? If your customer journey and products need improvements, set out a development plan for what you will tackle, and when. 

“At Freedom, we’re completing attestations on each of our policies to ensure that they’re meeting new and existing requirements, in this way we can ensure that if improvements need to be made, we can plan the development and Consumer Duty work around this.” - Nicola Matthias

Transparency

The specific Customer Understanding outcome requires not only transparency but also that customers can comprehend the entire journey. For your products, promotions and support offered, you will need to assess that all customers, especially vulnerable customers, are protected and supported under your policies and procedures. A good place to start will be the FCA guidance for ensuring the fair treatment of vulnerable customers that was published in June.

“We’re reviewing our end-to-end customer journey, looking at introductions to Freedom and the consumer’s onward path to lenders; are they able to freely interact with our products and services? We want consumers to realise the benefits of our services and meet their financial objectives without undue hinderance or complication.” - Nicola Matthias

Team Culture

Customer Duty is not the responsibility of a single person or team. Embed focus into all staff, so they know how, when and why their roles will be impacted. If you do, they will be likely to actively follow regulation, rather than passively stick within it. Leadership and governance should drive change throughout the business to deliver good outcomes for all customers.

“Here at Freedom Finance we’ve been holding round table exercises, team by team to run through the requirements of Consumer Duty and engage all staff before rolling out the implementation plan. We will have subject matter experts across the business who can share knowledge of the current processes and provide guidance on implementing change to meet the requirements of Consumer Duty.” - Andrew Fisher

Good Outcomes

Define good outcomes. This builds and enhances what was previously fair outcomes – you must now “act to deliver good outcomes for all retail customers”. Start creating a framework to show what this means for your business, look at each step, building in monitoring and evidencing outcomes and understand what this means for you and your customers.

“At Freedom we’re defining what good customer outcomes means for each step of our customer journey and ensuring that we can evidence and monitor that we’re meeting this.” - Andrew Fisher

Evidencing

With the implementation of Consumer Duty the FCA are clearly marking their approach of becoming more ‘data led’ and ‘assertive’; the FCA requires firms to be able to define, monitor and evidence their customer outcomes. Be prepared to provide these. Start assessing what data you have, what data you need and how you will monitor and evidence good outcomes. Use your existing analysis to build requirements and flag improvements, in both data and procedures.   

“The Consumer Duty is about us knowing our customer. It is about understanding their needs and, ultimately, it is about meeting their financial objectives. This means obtaining a good outcome for all customers regardless of situation or product, so that Freedom can continue to develop and improve.” - Andrew Fisher
 
You shouldn’t find any of these steps too challenging to implement. Don’t forget, the FCA isn’t updating Customer Duty to force a new exercise. There is a driving force to improve the industry, in both actions and perception. The new FCA guidance is about you knowing your customer. It is about you understanding their needs and, ultimately, it is about meeting the long-term financial objectives required. This means obtaining a good outcome for all customers regardless of situation or product, so that the industry can develop and improve as a whole.

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