On 17th August, Worksmart hosted a webinar with Shoosmiths on the incoming Consumer Duty. The webinar was attended by over 400 people, which goes to show how seriously this new regulatory change is being seen by regulated firms!
Those attending were representing teams from HR, compliance, risk and senior business leaders and who had previously registered an interest in the new Consumer Duty. We’re pleased to say the webinar was very well received by attendees, with the presenters from both Worksmart and Shoosmiths receiving compliments for their knowledge and practical guidance on the subject.
As part of the webinar, attendees were asked a handful of questions about the preparations their firms were making in readiness for the incoming regime. Both questions considered a firm’s approach and preparedness. With the first key deadline which is for Boards (or equivalent) signing off their firm’s implementation plan by the 31st October 2022, there is no time to lose. Although firms aren’t required to submit these plans to the FCA, the FCA reserve the right to request them at any time after this date. A ‘hard stop’ indeed.
The first question asked attendees:
Based on these results it would appear either a joint approach between 1st and 2nd line (33%) or 2nd line (34%) was the way most firms were proceeding. For us, this makes huge sense as the Consumer Duty rules spread so far and wide across firms. Ensuring people close to the ‘sharp end’, i.e. customer facing roles, together with those that are involved in product design e.plus the governance and controls that oversee each of those processes seems a sensible approach.
That said, historically most firms have responded to regulation with redesigned processes, controls and oversight. That’s OK but the Consumer Duty requires a rethink, i.e., a move from process to outcomes focus, and inclusion of a far broader data set, e.g., consumer biases in buying decisions, than has been used in the past.
So, second line, or first and second line working together, in preparation for the incoming rules makes sense but only if both are willing and able to think more broadly than they have done in the past.
(As a footnote, the 9% of firms who haven’t decided who is going to take the lead had better do so, and quick!)
The second question related to firms’ state of preparedness:
The responses are telling. With just 2 months until firms need absolute clarity on their response to the incoming rules, (remember the 31st October deadline), over half were still in early stages of preparation, i.e. ‘’undertaking gap analysis’ – 38%, or ‘not started yet’ – 14%. If this statistic is representative of the industry, there needs to be an intensive focus on Consumer Duty in the next two months.
Of course, this question refers to preparedness, not scope or terms of reference. We say this because the FCA have long said that whilst implementing SM&CR was key to creating more accountability, the real prize in creating a more consumer centric industry is culture. So, whilst 36% of responders identified their firms were in the latter stages of planning for Consumer Duty, i.e. ‘establishing a project team’ and ‘establishing governance frameworks’, what the question did not reveal was the extent to which these project teams and governance frameworks were focusing on culture, and a far wider, customer driven, set of metrics for informing the business on whether they are aligning themselves to the new rules. For example, I wonder what firms are planning to implement to inform them whether their products are really meeting the needs of consumers in their target market? Traditionally firms would tend to use customer satisfaction surveys to help manage (and if necessary) modify their offer. But will that be enough going forward, or do firms need to be more inventive?
Responses to these questions tell me that the industry needs to really get its skates on if it is going to meet the 31st October 22 deadline. And of course, the big unknown in these responses is the breadth of thinking that firms are applying when responding to the incoming rules. It’s going to be a busy autumn!