HOW TO EMBED CONSUMER DUTY IN 7 PRACTICAL STEPS

As the dust settles after the July deadline for Consumer Duty (CD) compliance, the overwhelming feedback we’ve had from clients and other contacts is that, with huge collective effort, and to much relief, their CD change programmes have delivered on time.

The hard work has paid off. They are compliant. But with a big caveat that there is a lot of work still to be done:

Outputs and procedures developed by CD project teams must be dropped into ‘business as usual’. Some have set up special oversight committees to supervise closure of programme workstreams.

Many firms have had to scale back their plans to get the ‘basics’ over the line. They now need to execute ‘Day 2’ plans to deliver outstanding requirements.

There is the ongoing challenge of embedding CD into day-to-day culture.

So how do you embed CD into your organisation’s culture and practices? We advise our clients to break down their next steps into 7 key areas:

1) FORMALISED PLANS AND RESOURCE ALLOCATION

With the deadline behind us, competition for project resource will be fiercer, so CD must be kept centre stage, with a clear roadmap and allocated budget and resources. To maintain urgency, some organisations have arranged a CD compliance audit to shine a light on remaining shortcomings.

Don’t forget that there is a further implementation deadline of July 2024 for legacy products. You may have a new set of requirements for these, and your plans should lean heavily on the frameworks already in place for live products.

2) IMPACTFUL REPORTING MECHANISMS

Reporting dashboards should evidence that your activities are having their intended impact, and that you can identify situations where there are poor customer outcomes. Some firms have sought legal opinion to define these metrics, for example what should be considered customer ‘harm’.

Try to develop meaningful ways to test your assumptions. Persistency and complaints are obvious areas to focus on, as you will have historical data to use as a baseline.

3) EVOLVING DATA COLLECTION AND REPORTING

The FCA expects that firms, especially larger ones, will become more sophisticated in their analysis of data over time, enabling them to drill down into the root causes of problems. The challenge is to standardise measurement of qualitative aspects (the ‘why’ and the ‘how’) as well as the more usual quantitative measures (the ‘what’ and the ‘when’).

Access to accurate and rich data sources is crucial. You should ideally build a ‘single view’ of customers across your business, showing the products they hold and how they use them. Once built, advanced analytics can extract deeper insights from customer interactions, identifying trends, patterns and concerns that may not be immediately evident through traditional reporting.

4) CLEAR METRICS OWNERSHIP AND OVERSIGHT

It should be clear which forums have oversight of which metrics. They should meet regularly and act quickly when performance drifts off target.

Each metric needs to be owned by someone senior enough to ensure performance against targets. Preagreed checkpoints and reviews, periodic attestations, and clear reporting lines will all help the organisation stay on track.

5) INTEGRATION INTO COMPANY CULTURE

Most organisations are encouraging employees to consider CD in their everyday conversations and decision making, and to escalate CD-related issues where they find them. Some have nominated CD Champions in key committees and forums to ensure that customers stay on the agenda.

L&D plans should explicitly incorporate training modules that educate employees about CD, its principles, and their role in upholding them. Links to CD adherence can be built into performance or bonus objectives, creating a direct incentive for employees to embrace CD’s principles.

6) BOARD ENGAGEMENT IN CUSTOMER-CENTRICITY

The need for customer-centricity applies at all levels of the organisation, including the boardroom. Boards should not merely passively receive updates on CD; they should actively engage in discussions and probe the data. To ensure success over the long term, a board and governance engagement plan should be created, with CD as a standing board meeting agenda item.

7) DISTRIBUTOR SATISFACTION AND ALIGNMENT

If you distribute products via intermediaries, establish regular feedback loops and collaborative mechanisms to gauge their satisfaction, identify potential pain points, and iteratively refine processes to achieve fair value and good outcomes.

Aim to develop clarity around your processes, such as where each party’s responsibilities start and stop, and automate any reporting needed. Make CD easy for your partners, and it could become a genuine competitive advantage.

Embedding CD is a journey that will need commitment and strategic integration into organisational culture, but with a few well-chosen steps your firm can transcend simple compliance and truly cement the Duty into your firm’s DNA. This will not only safeguard the interests of consumers but also strengthen your reputation with industry partners.

MATT NEILL, DIRECTOR, BEYOND INFO@BEYONDFS.CO.UK

Beyond is a fast-growing Financial Services consultancy focusing on critical business challenges in the most pressing areas of regulatory compliance and financial crime, improving operational performance, and delivering technology and data change.

Everything we do is focused on helping our clients succeed, through our deep understanding of their challenges, our friendly collaborative approach, and passion for making change happen. We can help accelerate your organisation’s remaining work around Consumer Duty, bring your programme to completion, help introduce new technology, or tackle complex data and reporting issues.