The FCA’s Consumer Duty rules come into force in July 2023. This article explains what the regulatory framework entails and how you can get your firm prepared.

What is Consumer Duty?

The Consumer Duty is a set of proposed rules and principles created by the Financial Conduct Authority (FCA), the regulatory body responsible for overseeing financial markets in the UK. 

Its aim is to ensure that financial firms put the interests of their customers at the heart of their business, and to improve the standard of conduct in the financial industry.

How is it different from Treating Customers Fairly (TCF)?

The FCA’s Consumer Duty is a new regulatory framework that builds on the existing Treating Customers Fairly (TCF) initiative, which has been in place for over a decade. 

Both initiatives aim to ensure that financial firms treat their customers fairly.

The main difference between the two is that the Consumer Duty places more emphasis on firms taking proactive steps to protect their customers, rather than simply avoiding harm.

When does the FCA’s Consumer Duty come into force?

For open products/services (i.e. new and/or existing ones), Consumer Duty comes into force on 31 July 2023. And for closed products/services, Consumer Duty comes into force on 31 July 2024.

What does it mean for your financial institution?

There are four key outcomes FCA is looking for from financial institutions:

1. The governance of products and services: firms must act in the best interests of their customers, placing their interests at the forefront of all business decisions. For that financial institutions need to understand needs and profiles of their customers.
2. Price and value: firms must provide products and services that are fit for purpose, deliver fair value to customers over the course of the product or service's lifecycle, and charge a fair price for them.
3. Consumer understanding: Companies must communicate with customers in a clear and transparent manner, providing information that is easy to understand. Firms must ensure their customers understand:
1. Benefits of the product
2. Risks of the product
3. Costs of the product
4. How the product relate to customers’ needs and financial objectives
4. Consumer support: firms must provide appropriate support to customers who may be vulnerable or have specific needs, and ensure that customers are treated fairly throughout their interaction with the firm.

How Claro Wellbeing can help firms meet the FCA’s requirements

Claro Wellbeing provides high-quality, engaging, qualified financial education content and coaching. We assist firms with meeting the requirements of the FCA’s Consumer Duty in a variety of ways:

1. Provide financial education: Claro Wellbeing can provide financial education to your customers to help them better understand financial products and services and improve financial literacy. By providing customers with the information and tools they need to make sound financial decisions, firms can help ensure that they are meeting the defined outcomes of the Consumer Duty. 

A. Claro Wellbeing can work with firms to develop educational material that is tailored to the firm's specific products and services. Educational materials include high-engagement video and written content.

B. Claro Wellbeing can also work with firms to develop educational tools for their customers, such as online courses or interactive tools, which can help customers improve their financial literacy and make more informed decisions. 

2. Offer financial coaching: Claro Wellbeing can provide financial coaching to your customers to help them make financial decisions more effectively. This can help your customers understand and meet their financial objectives. This service is also a great way to support your vulnerable customers.

3. Train your staff: Claro Wellbeing can work with firms to develop training programs that are tailored to the firm's specific products and services.

A. Claro Wellbeing can work with firms to design training programs to help employees better understand the needs and interests of their customers, and to provide guidance on how to communicate effectively with customers and help them make informed financial decisions.

B. Claro Wellbeing can provide training on behavioural biases and the psychology of decision-making, which can help employees identify and mitigate common biases that may impact the advice they provide to customers.

Overall, Claro Wellbeing can help firms meet the requirements of the FCA Consumer Duty by providing training and educational resources that are designed to improve the financial literacy of employees and customers, and to promote a culture of ethical conduct and customer-focused service.

Who 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 around your specific needs.

Further recommended reading

The FCA has published several documents about the Consumer Duty, including a policy statement, consultation papers, and guidance. You can find these documents on the FCA website:

• FCA Policy Statement on the Consumer Duty
• FCA Consultation Paper on the Consumer Duty
• FCA Guidance on the Consumer Duty