by Alec Wimbleton, Compliance and Business Assurance Director
Transitioning a project plan into the realm of Business as Usual (BAU) processes can be a formidable task, especially when regulatory oversight looms large. While fully integrating Consumer Duty into day-to-day operations will take time, most firms are making strides towards this goal. The focus is now shifting from closing existing gaps to embedding the new regime, and demonstrating cultural progression in line with the regulator’s expectations.
Let’s revisit the core requirements before delving into how firms can showcase their commitment to embedding Consumer Duty into their daily business operations.
The new Principle (PRIN 12) mandates that a firm must take actions to ensure favourable outcomes for retail customers. This directive comes alongside three overarching rules: financial services firms must act in good faith towards retail customers, avoid causing foreseeable harm to those customers, and enable and support them in pursuing their financial objectives.
All of these rules must find expression in the four key outcomes: product and service design, price and value, customer understanding, and customer support. It is incumbent on all businesses to demonstrate through their culture, governance, and accountability that they are actively pursuing these goals and, crucially, providing evidence of their efforts. The missing puzzle piece is how a firm should effectively implement these directives.
The primary focus of embedding Consumer Duty is often within the operational areas. However, there are several key areas where firms can showcase the successful integration of the Duty.
Accountability: The senior management of a firm holds the key to implementing the Duty and should provide annual attestations to assure the regulator. Ideally, they should designate specific individuals from among the senior management as leads, seamlessly integrating with the existing Senior Managers and Certification Regime framework. Firms should also introduce the new individual conduct rule no.6 for their staff, mandating that they “must act to deliver good outcomes for retail customers.
Governance: Acting to deliver good outcomes should be visibly embedded in a firm’s strategies, leadership, and governance arrangements. Strategies must explicitly prioritize customer-centric approaches. Leadership roles and responsibilities, as outlined in the Senior Management Functions’ Statements of Responsibilities, must reflect how the Duty influences the scope of these roles. Ideally, a board champion should be appointed to critically assess a firm’s decisions and ensure ongoing accountability. In any case, explicit responsibilities aligned with Consumer Duty should be documented.
Risk Management: Firms must establish a robust control framework that empowers their risk function to identify situations where good customer outcomes may be at risk. These concerns should be included in the risk register for thorough assessment. Consumer Duty-related risks should be consistently monitored against the firm’s Key Risk Indicators and actively managed. Expanding compliance scope and implementing regular monitoring and audit activities across the organization can provide clear documentation of these efforts.
Employee Engagement: Every member of staff should possess a deep understanding of Consumer Duty, its relevance to their role, and how they can contribute to delivering favourable outcomes for customers. Firms may need to re-evaluate their remuneration and incentives structures and transition towards performance metrics that align more closely with Consumer Duty principles.
Data Management: The collection and analysis of management information have never been more critical under the new regime. This data should be harnessed to facilitate learning, adaptation, and the improvement of products, processes, and services.
Successfully transitioning Consumer Duty into standard business practices demands a multi-faceted approach where accountability, governance, risk management, employee engagement, and data utilisation all play pivotal roles. Firms that navigate this transformation effectively will not only meet regulatory expectations but also foster a culture of genuine customercentricity.
Here at Positive Lending we have always prided ourselves on delivering a first class service and the best possible product available to each client. We have tweaked our processes to further evidence we are adhering to Prin12 and code 6. Our staff are trained and tested on their understanding of not only lender products but also complex client circumstances that mean some require a different approach to how we deliver our service.
Where we identify areas that could be done better all staff are asked to contribute to the solution and are encouraged to not only identify a problem but give solutions and buy in to any changes.
From board level down everyone is encouraged to ask questions and challenge processes to deliver the best possible outcome to clients every time.
CLICK HERE to visit our Consumer Duty page and find out what you can expect from Positive Lending and our Lenders in terms of Consumer Duty.
If you would like to know more about the FCA’s Consumer Duty Guidelines, please CLICK HERE.