Consumer Duty: What it will take to deliver Consumer Duty

Julie Pardy

Julie Pardy

With more than 30 years service in the Financial Services industry Julie has spent many years at the coal face undertaking a wide variety of roles in banking from Compliance to Sales, Operations to Training.

In this final blog in our series on the new Consumer Duty (CD), I will take a step back and take a look at CD ‘in the round’, focussing on what I believe are the key factors that firms need to get right to both comply and create competitive advantage.

Origins Of CD And The Bar Firms Need To Jump

With all the current focus on preparing for CD, it is easy to forget its origins, and so the FCA’s underlying aspirations for this regulation.

To do this, people need to look back to the financial crash of 2008.  After a year-long review into what went wrong and the subsequent publication of the “Changing Banking for Good” report, it was quickly accepted that the widespread evidence of wrongdoing meant fundamental change was needed. So, when SM&CR was introduced in 2016 not only did it deliver clear accountability at a senior level it also carried high aspirations of industry-wide culture change. Indeed, whilst the FCA talked at length about culture change being at the heart of SM&CR, it seemed to only do so with any real intent after the implementation date(s) had passed. For me, this represented a real lost opportunity for the FCA as it allowed many firms to focus purely on the procedural, i.e., record keeping, elements of SM&CR, at the point of implementation as opposed to having those more challenging culture change discussions from the outset

The subsequent collapse of London Capital & Finance and the findings of the FCA’s research into the Asset Management sector, (PS18/8), and the GI Pricing Practices Market Study, (PS21/05), all showed that SM&CR was not turning out to be the catalyst for culture change it was intended to be.

If we then add into the mix, a new management team at the FCA who set out a strategy that aimed to make a clear break with the past and make itself more innovative, assertive, and adaptive, then it was always clear that a greater focus on the end consumer was surely inevitable.

Consequently, CD sets a high bar for firms to jump and with the promised (threatened?) big data capabilities available, the FCA aims to be able to identify the behavioural signs of culture failure earlier that risk good outcomes for consumers.

Making CD Work, The Key Themes

Working with clients who are currently implementing CD, there are many elements required in order to achieve a successful implementation. For me however, three elements are key. These are:

  • Culture –For CD, culture change begins with the expectation that firms start thinking of consumers first, i.e., thinking ‘outside in, not inside out’. Saying this is easy but making culture change happen in practice is notoriously difficult. That said, the fact that the FCA has provided what it believes to be the levers for cultural change in the three cross-cutting rules and four consumer outcomes, should make it very clear to firms that this regime is not optional! And whilst firms are expected to appoint an INED into the role of the CD ‘champion’ for the firm, the FCA have made it clear that they expect CD to be everyone’s focus and responsibility and not just handed to one of the SMF function holders to “own” on behalf of the business. Therefore, if you believe that forcing organisational change, i.e., mapping out new processes and practices for embedding the cross-cutting rules and consumer outcomes, will lead to behaviour change and so culture, then reengineering processes and practices to ensure better compliance with CD is key.
  • Data – With the focus on consumers, firms will need to collect new sets of data, e.g., post-sale sampling to ensure the product / service still meets customer need, monitoring consumer behaviour / decisions through the sales process etc. Combined with the data already available to firms, this adds up to an extensive and really wide-angled data-set, (see GF22/5, section 11.33 for the types of data the FCA considers firms could be using to measure CD). Whilst this wide-angle data set promises real insights for firms, it also presents its challenges. The new data needs to be collected, collated, analysed and integrated with existing data. Therefore, this challenge should not be underestimated. To date, despite the known benefits of using RegTech tools, e.g. cost saving and improved compliance, plus the fact that, once installed, customer satisfaction with RegTech solutions is 90%+ (FCA Insight Paper – The Future Of RegTech, What Firms Really Want – 06/21), the uptake of investment in RegTech by firms, whilst increasing, is not keeping pace with the increasing complexity of regulation and sheer volume of data required to monitor compliance. My view is that CD should provide the tipping point for firms to make the jump into making the investments in RegTech that will underpin their compliance for years to come.
  • Governance – With the scope of CD, particularly the focus on outcomes, firms will need to review their governance arrangements and their suitability given these broader datasets. This means a thorough review of governance policies, procedures, responsibilities, and resourcing. And when done, these governance forums will need sufficient range of perspectives, e.g., economists, behavioural scientists, data analysts and finance professionals as well as compliance professionals, to make truly objective judgements of the data presented to them, particularly when making decisions around ‘fair value’ and ‘reasonable’. Finally, these governance forums will need the authority to enforce changes to firms’ processes and practices if they identify potential mistreatment of consumers through the data they have analysed.


If embraced, CD could be the driver for real culture change, organisational renewal and competitive advantage wanted by both the regulator and the marketplace. The risk, as with all change however is that if CD and its implementation is reduced to a series tick boxes and scorecard RAG statuses, then it will not have the desired regulatory outcome. Of course, there will always be a legitimate desire to monitor progress, but this should not preclude firms asking the big questions, the uncomfortable questions, that CD is expecting firms to have to ask themselves in the quest for better consumer outcomes.

I wonder how many firms will embrace the spirit of CD and be prepared to ask these uncomfortable questions or will they default to box ticking? If the FCA delivers on its ‘promise’ to be a more assertive regulator, their actions over next 12-18 months will answer my question. I hope I’m pleasantly surprised.

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