Emma RadmoreFCA has published the conclusions from a multi-firm review it carried out to gauge firms’ preparations for the implementation of the Consumer Duty. It asked a range of larger retail firms within its fixed supervisory portfolio for their implementation plans. It wanted to look at how firms were approaching implementation.
It was pleased with many of the plans, which it said showed that firms have understood the importance of focusing on consumer outcomes. But it was worried that some firms were not far enough advanced in their planning to give FCA confidence they would meet the July deadline. It says firms should particularly focus now on:
- effective prioritisation: firms may need to focus on areas in which they may currently be furthest away from meeting the duty and prioritise these;
- embedding the substantive requirements: FCA is slightly concerned that some firms may either have only superficially considered the requirements or else are over-confident that they are already compliant. It wants to see firms identifying and making changes needed to meet the new standards’ and
- working with other firms: some plans did not give enough attention to the need to work and share information with other firms.
Key observations from the study included:
- on governance, FCA found good evidence of appointment of champions and scrutiny and challenge of plans at board level with appropriate involvement of compliance and internal audit, but also saw some firms who had not made progress in these areas, including some smaller firms that had considered it appropriate not to appoint a champion at all – FCA feels this is not an effective approach, even though it has not mandated the approach firms should take;
- on culture, FCA found some plans that clearly set out how staff would be engaged to understand how to deliver good consumer outcomes, but others could not clearly show what changes the firm would be making;
- on deliverability, many firms have set out key workstreams with clearly mapped milestones, with some reflecting the need to prioritise or to take a pragmatic approach. But others were less progressed on gap analyses, and their plans were not so obviously targeted at addressing poor consumer outcomes. Other firms did not seem to have planned their resourcing needs nor considered key dependencies;
- on working with third parties, some firms had good engagement with key third party providers but others had either not engaged enough or did not seem to have considered the need to liaise with third parties within their implementation timetable;
- on outcomes, most firms had planned their implementation with reference to each outcome and had, for example, identified relevant products, considered what fair value means in the context of their business, were considering how they communicate and their customer support channels. Others, though , had high level plans which did not evidence how they had engaged with the substantive requirements of the Duty, or seemed complacent about how well past improvements would evidence compliance with the Duty;
- on data strategies, firms that had fully considered the consumer outcomes they sought had also considered the data they would need to measure and monitor delivery. Others, though, seemed to be planning to repackage existing data and not to have considered gaps or the outcomes the data would need to monitor.
FCA will continue to engage with fixed firms if they have concerns on their approach, and to monitor their progress in implementing the Duty. It will also support the board champions at some larger firms. For other firms, FCA plans to send a survey to a sample to understand their progress and will carry out targeted engagement with smaller firms.
FCA plans soon to write to firms highlighting its key overall expectations and some of the key risks and consumer harms it sees in specific sectors, and it will carry on updating its webpages and holding events.