Observations from the FCA’s Consumer Duty webinar: One year on

The FCA referred to examples of the positive impact, including:

• The interest rate increases for cash savings.
• Changes to the commission structure for GAP insurance.
• Simplification of the charging structure for financial advice and removal of early withdrawal charges.

The Consumer Duty was referred to as the beginning of a journey, and the FCA talked about its new objective and work to support digital innovation. Proportionality for smaller firms was mentioned a few times and the FCA talked about its call for input [1] on the review of requirements following the introduction of the Consumer Duty.

The FCA will publish a grid of its forward-looking Consumer Duty work and share further examples of good and poor practice, with a focus on the price and value outcome.

Culture

The importance of culture was highlighted, with a holistic approach to the Consumer Duty. Training materials, continuous improvement and responsiveness to points raised by the FCA are part of how the regulator gets a view of culture.

Complaints

There was a focus on complaints and root cause analysis to track customer outcomes, using Financial Ombudsman Service (FOS) insights and the wider information it shares on complaints.

Fair value assessment

The FCA listed five key ingredients for a good fair value assessment, based on:

1. Benchmarking as starting point, using the right comparable firms and products.
2. Data and credible evidence (both quantitative and qualitative).
3. Consideration of customer cohorts in the target market i.e. different people, channels and characteristics of those customers, including vulnerable customers.
4. Clear examination of the total price paid versus the benefits.
5. A holistic view, not only focused on price and value but also looking at customer understanding, support and the options given.

Outcomes monitoring

The FCA referred to the insurance outcomes monitoring multi-firm review [2] and (again) five key ingredients for outcomes monitoring:

1. Clearly defining outcomes specific to the business model.
2. Using a mix of qualitative/quantitative data types e.g. root cause analysis.
3. Using the data to identify poor outcomes.
4. Taking action where there is a risk of poor outcomes.
5. Evaluating the effectiveness of any action taken.

Authorisations

The Consumer Duty should be ‘woven through’ all parts of an authorisation application. Applicants should be ready to articulate what happens in practice and use guidance published on the FCA website.

The FOS said that customer journey mapping should be from a customer’s perspective and can be matched with their real experience e.g. calls and emails. This will help firms to determine a good experience, not just in straightforward cases but also where there are different customer needs or expectations.

In two years’ time, the FCA will do a post-implementation review to look back and see what has worked well and what hasn’t.

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[1] Review of FCA requirements following the introduction of the Consumer Duty | FCA

[2] Insurance multi-firm review of outcomes monitoring under the Consumer Duty | FCA