On 31 July, the FCA held a webinar on Taking the leap on the Consumer Duty: 1 year on, focusing on the regulation’s impact so far and priorities for the year ahead. The regulator set out its plans to publish a grid in the coming weeks of its programme of work relating to the Duty along with a call for input from the industry as it looks to simplify its rulebook to support industry growth while ensuring good customer outcomes.
Sheldon Mills, Executive Director of Consumers and Competition at the FCA, opened the event with an analogy: Consumer Duty is a frog and the FCA has seen firms feasting on the frog in its first year of implementation. Recognition was given to the progress firms have made, with a reiteration of its message about Consumer Duty being an evolutionary journey of continuous improvement and not a once and done. Continuing the frog analogy, he said: ‘We’ve taken the leap but there are many smaller hops to come.’
For the year ahead, the regulator stressed its need to prioritise work to address harm or potential harm to customers. There will be thematic work across specific sectors with a focus on price and value as it is aware this is an area where some firms are struggling.
The FCA will also be looking to better understand how firms are embedding the regulation and sharing good practice to support the industry with compliance.
Examples were given of firms that used the regulation to improve culture and outcomes in their businesses. One large advice firm has used Consumer Duty to drive significant changes to its business model and simplify its charging structure to strengthen transparency for its clients. Some have been gathering new data and metrics to better understand their customer base and implement new measures, for example to support customers who may have characteristics of vulnerability.
The FCA also pointed out how communications have been simplified and made easier to understand, as well as businesses being more proactive about communicating with customers about products that might be better suited to their needs.
The regulator championed innovation but also the need to balance this with customer protection. In its Financial Lives Survey, nearly half of consumers reported using their digital wallets to make payments for goods and services in 2022, compared to just 17% five years earlier. It was highlighted that there is a need to support those less digitally savvy and still reliant on paper.
In his speech, Sheldon Mills talked about how the FCA is looking to ensure that value overall is provided, not just in terms of price but also service and understanding the need to support customers more holistically. The FCA is working with the Financial Ombudsman Service (FOS), with the latter sharing complaints data to address pinch points across the industry.
Speaking at the event, Abby Thomas, Chief Executive and Chief Ombudsman at the FOS, talked about how poor service and a lack of support for customers remained a major cause of complaints, particularly where firms have not considered the needs of individual customers or put themselves in their shoes. She talked about one example where a bank had insisted that a customer with a health condition travel to a branch to complete a transaction.
Thomas said the best firms are those that focus on finding a solution to help the customer. Rather than focusing on closing down complaints, firms need to support customers and take time to listen to their concerns to get a better understanding of where things can be improved. She urged businesses to look at their own data as well as that from the FOS to see where changes can be made, demonstrating progress to embed Consumer Duty at every level of the organization.
When it comes to a tailored approach to customers and really listening to them, these are the foundations the best advice firms are built on. These are the businesses that will not think about Consumer Duty in terms of compliance, but instead understanding and delivering what is best for their customers.
Many will be perfectly placed to share their approaches and best practice for the wider industry to learn from. By collaborating and sharing in this way, we can continue to raise the bar for customers, our own businesses and the reputation of the wider sector.
Written by The Lang Cat
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