The FCA has published its final rules for the Consumer Duty along with timescales and there’s a relatively short window for firms to comply. Alastair Black, Head of Industry Change, highlights the practical support we can offer.
The FCA has published its final rules for the Consumer Duty – along with key timescales:
By the end of October 2022
If your firm hasn’t already started to create an implementation plan to meet the rules under the Consumer Duty, we recommend you do so now.Your firm has until the end of October 2022 for their Boards (or equivalent management body) to agree its implementation plan and to be able to evidence your firm has scrutinised and challenged the plan to ensure it is deliverable and robust.
Your firm should also be prepared, if asked, to share its implementation plan, Board papers and minutes with the regulator and be challenged on their contents.
By the end of July 2023
Your firm has until the end of July 2023 to apply the Consumer Duty rules to your products and services.You should also be aware of your obligations under the Senior Managers & Certification Regime (SMRC) too, which sets out clear senior management responsibility for complying with the requirements and standards under the Consumer Duty.
Your firm should also be prepared for spot checks here from the regulator and share documentation if asked to do so.
Background to the Consumer Duty
Under the Consumer Duty, the FCA wants to bring about an environment where the incidences of consumer harm, as seen in the past, don’t happen in the first place. The regulator wants an environment where firms place consumers’ needs at the centre of everything they do, offering products and services that are fit for purpose and which they know represent fair value.At the heart of the Consumer Duty is a new consumer principle. It effectively elevates the existing Treating Customers Fairly framework, requiring firms to act to deliver good outcomes for retail customers. It has to be said that firms already carrying out suitability checks and personal recommendations should already be focused on delivering good outcomes for clients.
Delivering good outcomes for clients is at the core
The Consumer Duty is about providing a framework to ensure your firm has suitable controls in place to check good outcomes are being delivered. This includes all advice firms. Most of the implementation process therefore should be about:- identifying the key controls the firm has in place
- who manages them
- where they are reported
- evidence how they are monitored
- identifying any gaps in these and determining suitable clear timely actions to close these gaps.
The regulator has also usefully outlined four key outcomes which set out, in some detail, its expectations of an adviser firm’s behaviour in relation to:
1. Products and services
2. Price and value
3. Consumer understanding
4. Consumer support
Each of these areas are key elements of your firm’s client relationships, and are instrumental in driving good client outcomes. This provides a great framework to consider all aspects of a product or service to ensure clients are getting good outcomes.
The FCA has called out ‘proportionality’
While all firms have the same responsibility to act to deliver good outcomes, there will clearly be differences in the capabilities of a firm depending on its size. The FCA recognises this, clearly calling out proportionality in the Consumer Duty rules and fully understanding that a small firm does not have the scale to build significant infrastructure and automated reporting.But the FCA does expect all firms to take the Consumer Duty seriously and it will require good judgement from firms around determining the right areas to prioritise to ensure they can be confident they will meet the requirements of it.
Support to help adviser firms create their implementation plan
There’s plenty of existing support and insight available to make the process of complying with the Consumer Duty as straightforward as possible. It’s clear many firms already are, or plan to tap into this.We’re also able to help your firm with its implementation plan through the practical support we’re offering to get you started. We can help your firm by identifying critical first steps, providing a framework to get you started with meeting the Consumer Duty rules. As part of this, we can also provide templates to help with your planning.
Take a look at our Consumer Duty support here.
We’ve also partnered with threesixty to provide firms with additional help.
This includes a plan that can be used in conjunction with the threesixty products and services guide and webinar.
These materials can help your firm demonstrate that you are putting clients at the heart of your business and that you offer fit-for-purpose and fair value products and services.
The action plan also includes:
- questions which firms can use to self-assess their current position around meeting the FCA requirements
- examples of evidence that may be relevant to demonstrate that the firm is meeting a specific requirement.
With its Consumer Duty, the regulator wants to make sure adviser firms continue to place consumers’ needs at the centre of everything they do.
The rules now need to be met within a relatively short timeframe and we’re here to support you along the way. If there’s more we can do to help, please get in touch with your usual abrdn contact.
Read all Alastair Black’s blogs on the Consumer Duty:
Why the Consumer Duty’s renewed focus on good outcomes is good for advisers too
The Consumer Duty, the advice industry and demonstrating value
Are you ready for the upcoming Consumer Duty regulation?
The value of investments can go down as well as up and your clients could get back less than they paid in.
The views expressed in this blog should not be regarded as financial advice.