The Consumer Duty principle proposed by the Financial Conduct Authority (FCA) represents a significant shift for the UK financial services sector, creating a new and higher standard for firms to protect retail customers, and serve their best interests. If that sounds like a rule with a broad impact, you are right. Covering all customer interactions — both direct and indirect — the new standard is amongst the biggest regulatory change firms have been subject to in some time.
As the FCA has said, “For many firms, this will require a significant shift in culture and behaviour.” In other words, complying with the duty will be no small undertaking. Just assessing the impact and developing action plans will require a great deal of work. Most changes may be dependent on — or complementary to — change programmes that are already underway, including technology deployments designed to automate back-office processes and enhance customer experiences. With the final rules due at the end of July 2022 and a proposed implementation deadline of April 2023, there is clear urgency to act.
To understand how the market is approaching the new duty, we spoke to 32 firms across the financial services industry. We wanted to learn about their priorities, their key transformation and technology challenges, and how their implementation plans are progressing. Our conversations included large global banks, smaller challenger and specialist banks, both life and pensions - and general insurers, as well as wealth and asset managers. Combined, these businesses have responsibility for more than 60% of the UK assets under management.
Based on our discussions, it is safe to say that firms increasingly recognise the broad impacts of the new duty. By conducting initial assessments, they have identified many of the moving parts that will have to be carefully managed to achieve compliance and see their business through the eyes of their customers. Interestingly, whilst many firms have said publicly that they will need more time to comply, the majority of those we spoke to expressed confidence that they should meet the deadline.
The most forward-thinking firms also see the value of taking a business-led approach, primarily increased customer-centricity across the business, rather than adopting a compliance-first mindset. In fact, programmes led by the C-suite or other top executives have bolder and more strategic ambitions in terms of deriving business benefits from the duty.
In this article, we highlight the key insights from our survey and recommendations on how firms can deliver valuable long-term benefits from their Consumer Duty investments.