The FCA Consumer Duty, which will come into effect on 31 July 2023, is a new set of rules that firms must follow to ensure that they treat their customers fairly and provide them with good outcomes.
The FCA Consumer Duty is a significant shift in the regulatory framework, placing the onus on firms to focus on customer outcomes rather than just regulatory compliance.
In this blog post, we will discuss how firms can prepare themselves to support and empower their customers under the FCA Consumer Duty.
1. Understand the FCA Consumer Duty
The first step for firms is to understand what FCA Consumer Duty is and what it means for them.
The FCA has provided guidance on the FCA Consumer Duty, which firms can use to familiarise themselves with the rules. The FCA Consumer Duty consists of three core elements:
- A duty to act in the best interests of customers
- A duty to take reasonable steps to avoid or mitigate harm to customers
- A duty to enable customers to pursue their financial objectives
Firms should understand how each of these elements applies to their business and what they need to do to comply with the rules.
2. Understand your consumers
The next essential step for firms is to understand their consumers, their needs, wants and preferences.
This is critical to providing tailored products and services that meet their customers’ needs. By gaining a deep understanding of consumers, firms can design and deliver products and services that provide good outcomes for them.
- Conduct customer research: To design products and services that meet the needs of their customers, firms must first understand their customers' preferences and behaviours. Conducting customer research, such as surveys or focus groups, can help firms gain insight into what their customers are looking for in a product or service.
- Establish clear product governance arrangements: Firms must establish clear product governance arrangements, including a product approval process, ongoing monitoring, and regular reviews. This will ensure that products and services are designed with the customer in mind and that any issues or risks are identified and addressed promptly.
- Embed customer outcomes in product development: Firms must embed customer outcomes in the product development process, from the initial idea through to the launch of the product or service. This means considering how the product will meet the needs of different customer segments and how it will deliver good outcomes for them.
3. Review customer journeys and processes
Firms should review their customer journeys and processes to ensure that they align with the FCA Consumer Duty.
This includes reviewing how they interact with customers at each stage of the customer journey, from initial contact through to post-sales support.
Firms should identify any areas where they could improve customer outcomes and take steps to address these.
4. Train employees
Firms should ensure that all employees are trained on the FCA Consumer Duty and how it applies to their role.
This includes training on how to understand the consumers better, how to identify and mitigate potential harms to customers, and how to provide support to customers in pursuing their financial objectives.
5. Implement appropriate policies and procedures
Firms should implement appropriate policies and procedures to support compliance with the FCA Consumer Duty.
This includes having clear policies on how to identify and manage conflicts of interest, how to handle complaints and how to provide support to customers who may be vulnerable.
6. Monitor and review
Firms should monitor and review their compliance with the FCA Consumer Duty on an ongoing basis.
This includes regularly reviewing customer outcomes and taking steps to address any areas of concern. Firms should also monitor and review their policies and procedures to ensure that they remain fit for purpose and aligned with the FCA Consumer Duty.
Whom to speak to at Claro Wellbeing
Galina Stavskaya CFA, leads partnerships at Claro Wellbeing and will be the best person to explore if Claro Wellbeing can help you with your specific needs.
Further recommended reading
The FCA & FOS has published several documents about the Consumer Duty, including a policy statement, consultation papers, and guidance. You can find these documents on the FCA & FOS website:
Is your firm ready for 31 July 2023?
Arrange a call with Claro Wellbeing to discover how we can help fast-track your firm's preparations for the FCA's Consumer Duty.