Consumer Duty: do you need more resource?
We were tempted to misquote the Jaws line as “You're gonna need a bigger boat” but suspect readers might have missed the Jaws phenomenon. The tag line “just when you thought it was safe to go into the water” equally applies though, with reference to the FCA's increasingly aggressive and intrusive approach.
Firms reading this will question whether this is blatant scaremongering… but let us come back to that at the end.
So why focus on resourcing? To summarise, under the Consumer Duty there are high level requirements (applying to firms and senior managers) to proactively avoid causing harm and act in the interests of consumers. Underpinning this are requirements to ensure products and services are developed, promoted and delivered at the right price and value, with the right level of customer service, and with clear messaging which empowers consumers to make their own decisions.
In practice this means having a very clear target market, summarising the needs and benefits the service/product fulfills (and why the price is consistent with this value), and ensuring messaging is delivered in a way this target market understands. You might think you are already doing this, but it is worth challenging this assumption and asking yourself:
Does the firm have a detailed and robust product governance process (with front line/compliance/board oversight) including an understanding of communication channels, and a marketing strategy with appropriate 'handrails' such that you are not targeting the wrong market? Is there detailed testing on areas of weakness (introducers, sales staff, product/service performance, risks and several others) and MI reviewed by the Board?
Is price and value just a comparison to fees charged by competitiors? Or is it a root and branch review of all that is delivered, with analysis of any fees, charges, costs compared against this 'value'? Is it done on an ongoing basis? Is relevant MI produced, with the review signed off by the Board and compliance?
Do marketing/compliance staff (and the Board) understand concepts such as gamification, sludge practices and concerns with online choice architecture?
Are you testing different areas of communication (actual consumer testing to ensure messages are understood and delivered appropriately)? Do you have a formalised communication process, with dedicated staff training to understand issues such as vulnerability and cost of living, complaints handling (as well as customer service skills)? How are you testing all these channels and interactions? What MI is reviewed by the Board?
Different business models will have specific focus areas (take a look at the FCA Dear CEO letters), and this is a brief summary. We suspect most firms have not calculated the extra resource needed for the increased testing and analysis of data to ensure compliance with the Consumer Duty, nor established who is responsible…(front line or passed to Compliance again?).
As for scaremongering? We don’t think so. There is simply a greater compliance risk based on the new rules and an increasingly engaged regulator. How you manage this risk is your choice.
Please get in touch if you need any assistance with your Consumer Duty programme of work. We can help with your planning, provide tools to assist with implementation, or review and challenge the work done thus far.