With one month to go before the consumer duty comes into force, the Financial Conduct Authority is calling on firms to make sure they are on track to meet the deadline.
In an update this week (June 28), the FCA highlighted key questions from the finalised guidance for firms to keep asking themselves.
It said this should help firms reflect on their implementation of the duty and identify gaps or areas for improvement.
The questions were:
- Are you satisfied your products and services are well designed to meet the needs of consumers in the target market, and perform as expected? What testing has been conducted?
- Do your products or services have features that could risk harm for groups of customers with characteristics of vulnerability? If so, what changes to the design of your products and services are you making?
- What action have you taken as a result of your fair value assessments, and how are you ensuring this action is effective in improving consumer outcomes?
- What data, MI and other intelligence are you using to monitor the fair value of your products and services on an ongoing basis?
- How are you testing the effectiveness of your communications? How are you acting on these results?
- How do you adapt your communications to meet the needs of customers with characteristics of vulnerability, and how do you know these adaptions are effective?
- What assessment have you made about whether your customer support is meeting the needs of customers with characteristics of vulnerability? What data, MI and customer feedback is being used to support this assessment?
- How have you satisfied yourself that the quality and availability of any post-sale support you have is as good as your pre-sale support?
- Do individuals throughout your firm – including those in control and support functions – understand their role and responsibility in delivering the duty?
- Have you identified the key risks to your ability to deliver good outcomes to customers and put appropriate mitigants in place?
Nisha Arora, director, cross-cutting policy and strategy at the FCA, said: “The consumer duty presents a real opportunity for financial services.
“Not only do we expect the duty to deliver higher standards and reduce consumer harm, but it should also increase trust and confidence, boost competition and innovation and mean firms face fewer rule changes in the future.”
The City watchdog also published results from a survey of smaller firms, which looked at firms’ preparedness in some of the sectors where the FCA might have expected firms to be less engaged and prepared.
The survey found that 64 per cent of firms surveyed said they would be fully compliant by the deadline and a further 23 per cent said they would comply with most requirements by the deadline, but would still have some work to do.
Some 7 per cent of firms said they would still have significant work to do after the deadline or had not started work on the duty.
The FCA said the results gave a snapshot of firms’ preparedness three months before the July implementation deadline and showed that most firms in these sectors were engaged, understood the requirements of the duty, and were on track with implementation.
However, a small minority still had significant work to do and needed to seriously accelerate their implementation work.
Arora said: “We are pleased by the progress most firms have made to be ready in time, but we are aware that some firms have more to do to meet the deadline.
“However well prepared a firm thinks it is, it’s crucial that its leaders are asking the right questions, such as the 10 key ones we are reminding them of today.
“This will make sure the firm is on track in implementing the duty.”
The FCA said it knows from its supervisory and engagement activity that many firms have already taken significant steps to accelerate their implementation work since this snapshot of firms’ progress was taken in March to early May.
“Once the duty is in force, we will prioritise the most serious breaches and act swiftly where we see firms causing actual or potential harm to consumers,” Arora added.
Adviser questions
Elsewhere, Bankhall was urging advisers to ensure they are fully ready for the forthcoming changes.
Linda Preston-Todd, client relationship director at Bankhall, shared some of the top questions currently being put to the team by advisers.
- How can I evidence customers’ understanding of recommendations?
- How can I determine if a customer is vulnerable?
- How can I practically measure fair value?
- Am I at risk of causing foreseeable harm, if a client doesn’t want to have a protection conversation?
- As a small advisory firm, where should I be focusing my attention?
Bankhall said a good starting point is to have a standard list of questions to ask each client after they’ve engaged with their adviser.
