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The FCA is especially focussed on those areas where financial services firms are not helping customers to meet their financial objectives or where firms’ actions, or inaction, may lead to foreseeable harm. These objectives have been made clear through the specifics of the Consumer Duty rules and in public comments. The FCA have challenged firms to support customers through the current cost of living crisis and see it as the first test of whether firms are starting to meet the expectations of the Consumer Duty.
The FCA also recognises the large-scale impact the duty will have. In his speech to the Consumer Protection in Financial Services Summit, Sheldon Mills, the FCA’s executive director of consumers and competition, said, “Consumer Duty is a significant shift, both for firms and for the FCA.”1
Because of the scope, the FCA expects compliance to be an iterative process. During the EY Consumer Duty webinar, Mills confirmed that the FCA is seeking “substantive compliance” in time for the “day one” implementation deadline of July 2023. In other words, the FCA is taking a long-term view, and wants to see firms challenging themselves to continue to improve and deliver better outcomes for customers. Financial services organisations should recognise this change requires a shift in mindset, not just compliance by a particular date.
Though many firms did not at first clearly understand how FCA expectations had changed under the duty, they now recognise that initial compliance should not be the only objective of their implementation plans. In conducting principle and outcome based assessments of their services, firms have come to see that long term compliance means more than just monitoring internal process effectiveness, for example, or validating that product communications are understandable; the organisational mindset and knowledge of the customer must change as well. Staff at every level must be trained, empowered and motivated to actively question how offerings relate to customer outcomes.
This is the critical change in thinking that firms will need to make now and sustain in the future. This article will explore five steps to help organisations prepare both for the initial deadline and to enhance their capabilities over time.