At the end of last month the FCA gave a clear steer on what they expect firms to be doing to implement the Consumer Duty effectively by the end-July deadline. The comments from the regulator come from its review of larger firms' Consumer Duty implementation plans and from the FCA's engagement with firms on Consumer Duty issues. The FCA highlights good and bad practice, which firms should be considering carefully and taking on board in their implementation work.

The FCA focuses on six key areas around Consumer Duty implementation, and within these highlights as top priorities the need for firms to:

  • prioritise effectively their implementation work
  • embed the substantive requirements to meet the higher Consumer Duty standards
  • work with other firms in the distribution chain

In this briefing we identify some of the main actions firms should be taking from the regulator's findings.

1. Governance and oversight

    Firms need to ensure there is executive accountability for, and board oversight of, their implementation plans.

    Firms should ensure that they:

    • evidence that boards and committees have fully discussed, scrutinised and challenged detailed implementation plans. For example, resourcing of implementation and interaction with other ongoing projects should have been probed.
    • have risk-assessed their implementation plans. Risk and compliance teams or internal audit teams (where firms have them) should be engaged. Risks to successful and timely delivery of the implementation plan, the effectiveness of controls around implementation, and pre- and post-deadline implementation assurance work should be assessed.
    • have an implementation strategy leader (for example a board Consumer Duty champion). Individual workstream leaders should also be in place.
    • scrutinise Consumer Duty implementation on an ongoing basis. Making Consumer Duty compliance a standing agenda item at board meetings and engaging risk and compliance and internal audit teams to conduct internal reviews are examples of good practice.
    • interpret the Consumer Duty consistently across all areas of their business.

    2. Meeting the deadline

    In order to meet the challenging deadline firms needs to be prioritising their implementation work.

    Firms should ensure that they:

    • have a clear line of sight of the deliverables, milestones and target completion dates.
    • track progress against the milestones and timeline.
    • have adequately resourced implementation programmes. Where resource is stretched a plan for managing that should be in place.
    • identify and address any shortfalls for timely implementation (for example technology, or budget).
    • assess and address interaction with competing internal change or strategy programmes.
    • prioritise areas where the highest risk of customer harm is.
    • prioritise areas which are furthest away from Consumer Duty compliance.
    • assess risks and internal and external dependencies and put in place mitigation strategies.

    3. Engaging with third parties

    Firms in a distribution chain need to be working and sharing information with other firms in that chain. The FCA milestone for manufacturers to complete their Consumer Duty reviews and share information with distributors is end April 2023.

    Firms should ensure that they:

    • have clearly identified implementation dependencies with third party providers and have allocated time for these in their plans.
    • actively engage, and exchange information with, third parties in a structured way.

    4. Meeting the substantive Consumer Duty requirements

    Firms need to look at the detail of the Consumer Duty rules and guidance, identify where they fall short, make necessary changes to products, communications, systems and processes to meet the four Consumer Duty outcomes.

    Firms should ensure that they:

    • interrogate the adequacy of - and identify where they need to build on or make changes to - their existing frameworks and processes to meet the higher Consumer Duty standards.
    • detail the amends and uplifts to existing assessment frameworks to meet the Consumer Duty.
    • have carried out a detailed analysis of the Consumer Duty requirements, including interpreting what challenges those requirements present to their businesses and to the consumer outcomes they intend to deliver.

    5. Having data strategies in place

    Firms must identify, monitor and evidence good customer outcomes. Data sources which evidence good customer outcomes will depend on the firm, its clients and business.

    Firms should ensure that they:

    • have a good understanding of the data and metrics available across their businesses and have a strategy for bringing these together to monitor outcomes and address any poor outcomes.
    • have identified gaps in data and have a plan in place to address these.
    • are able to demonstrate that an approach which relies on repackaging or supplementing existing data allows them to monitor and evidence outcomes effectively.
    • monitor outcomes for different groups of customers, including customers in vulnerable circumstances.

    6. Embedding a Consumer Duty culture

    Good customer outcomes must be central to firms' culture and strategy.

    Firms should ensure that their:

    • people and training approach engages and makes sure that all staff understand their Consumer Duty responsibilities. Training materials may benefit from an update to promote a culture that focuses on delivering good customer outcomes.
    • people policies, including incentives, lead to good customer outcomes. Reward and incentive frameworks should be reviewed and (where required) refreshed so that they reflect the Consumer Duty.

    Next steps

    The pace of regulator messaging has quickened as we have moved into the second half of the implementation period. The FCA's sharing of findings are a valuable steer to firms developing their existing implementation plans and carrying out their implementation programmes. The regulator has identified what firms should be focussing their attention on in the final months prior to the implementation deadline.

    At a sector level, the FCA will shortly issue letters which will highlight its key expectations on implementing the Consumer Duty and identify key sector-specific risks and consumer harms. Targeted engagement with smaller firms is also in the pipeline as are regional in-person events for specific groups of small and medium-sized firms.

    Firms should be monitoring all updates from the FCA in this space to ensure they are in a strong position for delivering the Customer Duty on time.


    Lindsay Lee

    Senior Associate