Meeting the Consumer Duty
The FCA will introduce new Consumer Duty rules in July 23, placing a responsibility on firms to deliver good customer outcomes and to evidence that they are doing so. The FCA will also require firms to evidence that they are offering fair value to customers.
We have designed a framework that assesses whether firms are providing both good customer outcomes and fair value. Moreover, we aim to help firms prove this - not just to the regulator but also to customers and other external stakeholders.
The rules come into force in July 2023.
The Consumer Principle will be underpinned by three cross-cutting rules. Firms must:
- act in good faith toward retail customers
- avoid foreseeable harm to retail customers
- enable and support retail customers to pursue their financial objectives
They must do this by ensuring they meet four key outcomes:
- products and services are fit for purpose
- consumers receive fair value
- communications support and enable customers to make informed decisions
- firms provide a level of support that meets customers' needs
The FCA says:
“We would expect a firm’s board, or equivalent management body, to consider a report from the firm assessing whether it is acting to deliver good outcomes for its customers which are consistent with the Consumer Duty, at least annually.
This assessment should include:
- the results of any monitoring that the firm has undertaken to assess whether their products and services are delivering the outcomes that they expected
- new and emerging risks to good outcomes for consumers
- any evidence of consumers or groups of consumers who are not achieving good outcomes and an evaluation of the impact and the root cause
- any evidence of consumers or groups of consumers who have characteristics of vulnerability and are not achieving good outcomes
- actions taken to address any risks or issues, and
- whether the firm’s future business strategy is consistent with it acting to deliver good outcomes under the Consumer Duty.”
The Fairer Finance Framework
Using a combination of our own data, data provided by the company and interviews with senior stakeholders; we will provide a clear picture of how a company is performing in terms of the Consumer Duty’s four key outcomes.
The report will highlight any identified emerging risks which could lead to poor outcomes for customers.
The final output will be a report with a grading on a 5-point scale, along with clear actions required to meet best practice. Firms that receive top ratings will have the option to use the accreditation in their marketing.
If you would like more information about our Consumer Duty Framework, please get in touch.