Consumer Duty Implementation Plans – Good Practice

In last week’s article, we discussed key focus areas recommended by the FCA in their review of firm’s Consumer Duty implementation plans. This week, we’re looking at the elements of good practice highlighted by the regulator, with the intention that firms can “develop their implementation plans and approach in line with good practice where appropriate”. 

Governance and Oversight 

The FCA has emphasised that they expect change to be driven from the top and will be holding firms, including senior managers and boards, accountable for the delivery of good consumer outcomes. 

Many firms were shown to have frameworks in place with clear executive accountability for delivery included in their plans, which had been scrutinised by boards and internal risk functions. 

For example, one firm was conducting one-to-one deep dives with board members to review plan deliverables. 

As required by the regulator, most firms had appointed a Consumer Duty champion to ensure the Duty is raised at all relevant discussions and that consumer outcomes are a key focus going forward. Some firms with large group structures may wish to appoint more than one champion if they comprise different regulated entities or business functions. Establishing a central forum to ensure consistency of interpretation and implementation may also be useful. 

The FCA has also emphasised the need to include processes for ongoing scrutiny of implementation work, such as making the Duty a standing agenda item at key governance forums and arranging independent reviews of implementation work.

 Culture and People 

For many firms, the focus on consumer outcomes will require a cultural change to embed customer’s interest throughout organisational strategies, leadership & policies. 

Some firms’ frameworks had outlined both staff-wide and individual training plans, to ensure all staff understand their responsibilities, with one firm providing interactive training to its board. 

Firms may wish to raise awareness through internal communication campaigns and by updating internal materials to show how company values align with delivering good outcomes for consumers. It may also be necessary to reconsider reward structures and performance management processes to reflect the Duty. 

With senior management expected to lead the change, some firms have committed to reviewing their SM&CR regime. 

Deliverability 

The FCA highlighted that most firms have been realistic about meeting the deadline, with one firm having clearly aligned workstreams to the structure of the Duty and outlined key deliverables, milestones, and completion dates, with a framework for tracking progress. Many had also defined implementation work in line with the four outcomes or elements, such as policies and processes, monitoring outcomes and training. 

As some firms have done to ensure timely implementation, firms may wish to assess where work aligns with other ongoing initiatives and could reduce the efforts required, as well as evaluate where conflicts may arise, such as with timing or resources.

The triaging of implementation work was also proposed, with firms outlining plans to prioritise areas that require the most work or that hold the greatest potential for poor outcomes for consumers. Some firms have also taken more flexible approaches by implementing solutions concurrently and looking at ’tactical’ fixes, with more extensive work planned following the deadline. 

Many firms provided an analysis of delivery risks, with the most considered frameworks including mitigation strategies, assigned owners and plans to track risks. 

Third Parties 

In their plans, firms should have considered how they will work with others to ensure they have the information they need to properly implement the necessary changes. The FCA has set a ‘milestone’ for manufacturers, to complete all necessary reviews and share information with distributors by April 2023. 

Many firms recognised the importance of working with others within the distribution chain. In one example, a firm had set “a cross-outcome objective to work with partners in a transparent way to ensure cooperation”. Other firms were:

• identifying key third-party relationships
• working with a key supplier on an engagement framework
• conducting face-to-face workshops with third-party agents to design their approach 

One firm was even assessing relevant contracts to embed requirements into renegotiations. 

RWA has launched a Consumer Duty gap analysis to help firms implement the new rules and guidance. If you would like more information about this or require any assistance in relation to the new Consumer Duty, please contact your Compliance Consultant. Alternatively, get in touch via email at helpdesk@rwagroup.co.uk or call 01604 709509.