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FCA Review of Consumer Duty Implementation Plans

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.

The FCA is working hard to help firms implement the necessary changes ahead of the ‘go live’ date for the new Consumer Duty (CD) regulation in the summer of this year[1]. The regulator has created a series of pages designed to promote understanding, and support preparedness for, the incoming rules, including a review of firms implementation plans.  And it’s this review of implementation plans that I’ll focus on in this blog.

Implementation Plans

Towards the end of 2022, the FCA undertook a review of several firm’s implementation plans.  The FCA looked at implementation plans from “Fixed Portfolio Firms”, i.e., those that have a dedicated FCA supervision team. The review makes some very interesting observations about the state of preparedness in the industry for the incoming Consumer Duty requirements.

Before I highlight some of the key findings, it’s worth remembering that the review focuses on firms that have fixed supervision, which tend to be the largest dual regulated entities such as banks and insurers and as such may not be representative of the industry as a whole. On one hand one could argue these firms are the largest and therefore likely to have the most complex business models leading to the greatest complexity in implementation of CD. On the other hand, these firms will likely have the largest resource pools to draw on to make the incoming regulation a success. So, whilst not necessarily representative, the review nonetheless provides a useful benchmark for firms to critique their plans and make progress against them.

The FCA summarised its findings into six areas:

  1. Governance and oversight – of the implementation plan
  2. Culture and people, i.e., training, reward, recognition, and communications
  3. Deliverability – of the implementation plan
  4. Third parties – relationships and sharing of information up and down the ‘value chain’.
  5. Four outcomes – feedback on each of the consumer outcomes
  6. Data strategies – plans for gathering data post implementation to ascertain progress and compliance.   

Give that Worksmart are a RegTech company providing software solutions to address the regulatory demands placed on firm, I intend to focus on the final finding, i.e., Data Strategies. The regulator highlighted this area as one of the six because it recognises that CD is very different from other regulation in that it requires firms to gather data that enables them to see themselves as customers see them. Customer related data has typically played second fiddle to traditional metrics such as sales, costs, productivity, headcount etc. With the exception of course of complaints data about which they must submit regulatory returns on a regular basis.  Some firms in addition have in recent years been gathering more ‘real time’ customer data through things like Net Promoter Scores and assessments and Trust Pilot reviews and scores. However, I do question the prominence this ‘real time’ customer data is given over the traditional metrics.

The regulator identified where firms have thought hard about the outcomes they want to deliver, and they had then gone on to think about what data they needed to collect to monitor their progress against the identified outcomes. This thinking has extended into considering their ‘firm wide’ data set and identified any gaps related to the new Consumer Duty outcomes they are looking to meet. Finally, these firms demonstrating ‘good practice’ also thought about their current systems and how they needed to be developed, or where indeed they considered that new systems needed to be implemented in order to close gaps. By contrast, the firms that were less prepared tended to think at a less granular level and had not really thought things through sufficiently, i.e. what data they needed to gather, from whom, the methods they could use, how often and how they would pull this data together into a ‘CD dashboard’ from which they could make decisions about their delivery of good customer outcomes.

And if these are the regulator’s conclusions for these large firms, I do wonder about the state of preparations in other, less well-resourced areas of the industry! And yes, I understand that proportionality is relevant, however I suspect I’m right to be concerned for many firms.

That’s where Worksmart’s RegTech solution suite comes in. Our solutions enable firms to gather data on customer outcomes. From ‘post interaction’ analysis, e.g. complaints management and business persistency (whether products / policies are cancelled post sale) , through to ‘in process’ analysis, e.g. agent quality checking, our solutions deliver many of the outcome measures suggested by the FCA in their finalised guidance, (FG22-5, section 11.33). And, unlike many other solutions, Worksmart’s RegTech suite identifies warning flags, which then connect to  workflows to drive corrective action, which in turn then allow monitoring of the required actions which will in turn  evidence the improvements in customer outcomes.

No doubt your firm will already have some of the data the FCA identified in their Final Guidance as suitable for use is assessing consumer outcomes and be working on reviewing their effectiveness as part of your implementation plan.  However, our experience shows that many firms have clear gaps in their MI and reporting suites that are leading them to review their current tech stack and suppliers.  If that includes your firm, then your experienced implementation consultants will work with you to identify the outcomes measures your firm already has in place and what gaps currently exist. Once understood, we will recommend a solution that uses your existing data and blends it Worksmart’s functionality to provide you with a range of customer outcome metrics that will give confidence that your firm is complying with both the spirit and as well as the letter of Consumer Duty.

The fact that the FCA are highlighting data as one of their key findings tells me the importance they are placing on monitoring customer outcomes. Without this ‘customer dashboard’ firms will find it very difficult to make the balanced and targeted decisions necessary. For everybody’s sake, let’s hope firms take this review from the FCA as clear guidance on what they need to do between now and the summer.  

[1] Implementation date is 31st July for new and existing products or services that are open to sale or renewal. Closed products or services is 31 July 2024.   

Like to know more about how Worksmart can support you?… reach out to the team at info@worksmart.co.uk or book a meeting to find out how the latest RegTech can help you navigate the new Consumer Duty.

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