We are at the start line of a marathon for Consumer Duty and it is unlikely to be a sprint finish.
In fact, a finish line has not even been marked out on the course. Consumer Duty was a key phrase used in 2023 but don’t think you’ll hear any less of it this year – if anything, it will be referred to more frequently.
With the Financial Conduct Authority having invested a lot of time and effort into the new rules, it is going to be looking very closely at how firms are putting consumers’ needs front and centre.
There was a lot of attention on Consumer Duty in the run up to the open book implementation date in July last year, but anyone who thought that marked the end of the race was mistaken.
The regulator is not afraid to hammer home its message that Consumer Duty is “not a once and done exercise” and I can understand why.
Keep on running
The regulator says consumers are already reaping the benefits of the changes made so far. These include the development of new data to measure outcomes, ensuring the right products reach the right customers and improving communication to boost consumer understanding.
But it wants to go much further. It hopes that with higher standards and more firms innovatively competing for consumers, we will see greater trust and confidence in markets which in turn will support economic growth.
FCA director of cross cutting policy and strategy Nisha Arora strongly hinted that we should all challenge ourselves on whether the implementation exercises that were carried out have “really delivered what’s needed”.
See also: All I want for Easter is the findings of the FCA’s thematic review
None of it should be viewed as a tick box activity. Instead, it needs to be reviewed on an ongoing basis.
While no medals will be handed out for this marathon, the regulator suggests “the prize is huge if we can get this right”.
It can be easy to get so caught up in the policy, process and system changes required by the Duty that companies risk losing sight of the consumers we are here to serve. It’s paramount that does not happen.
According to Arora, the Duty is an “integral part” of the FCA’s approach and mindset at every stage of the regulatory lifecycle from authorisation to supervision and enforcement. It is a “golden thread” that runs through all its work, so we can expect to keep hearing about it.
As we all line up for the start of this marathon, we must each interpret the rules of the race and apply it to our own businesses, customers and circumstances. The FCA will highlight good and bad practice along the route, but it won’t tell us what running style we should adopt or what trainers to wear.
See also: Defaqto launches Consumer Duty profiles
One thing for certain is the regulator is taking the Consumer Duty seriously and its message to firms is to do likewise. We will all need to try to keep up the pace and no doubt navigate a few hurdles and obstacles as we do so.
It is the regulator’s hope that the work we have all put in to implement and embed the Consumer Duty means we will spot problems before they arise. We have to take the initiative without relying on the regulator to tell us what to do.
But just because there’s no finish line in sight doesn’t mean we can’t all keep working on our personal best.
On your marks, get set, go.
Steve Owen is director of product management at Morningstar Wealth
This article was written for our sister title Portfolio Adviser
