The FCA will want to see what has changed post-implementation and evidence of sustainable new policies and procedures. For example, have products been amended or withdrawn by manufacturers as a result of feedback from retail customers via distributors? Have communications been more tailored to consumer needs and has there been evidence of lessons learned on client complaints?
One imminent next step will see firms transitioning to their 'Day 2' plans. These plans set out how firms are to deliver any outstanding tasks to become compliant with the new Duty and how to prepare for the long term. In particular, one source of consumer harm that the FCA will be focusing on arises from the distribution chain. The focus will be on the “handshakes” between the firm and the wider distribution chain that could potentially cause harm if not appropriately mitigated. These are known as the formal compliance arrangements between manufacturers and distributors that are embedded from the beginning of the chain to the end customer. Firms need to understand their role and accountability within their distribution chain and have strategies surrounding any identified risks that will be monitored and mitigated. If this has not been conducted, it must be a priority in 'Day 2'.
The communication stream between manufacturers and distributors must facilitate the FCA's enhanced consumer protection. Manufacturers need to request feedback from distributors on the performance of their product for the end client to ensure that there is no foreseeable harm that could be alleviated. Moreover, distributors should ask about the details and processes behind the design of the products, this could be via due diligence questionnaires to enhance their product understanding and other opportunities where the manufacturer can scrutinise their products within the lens of the Duty. Furthermore, a firm’s product governance set-up should facilitate this exchange of information and business decision-making. Evidence, specifically in the form of data (qualitative or quantitative) and documentation, will showcase the changes implemented post-implementation. For example, if any products are withdrawn because of complaint analysis and manufacturer communication, then the decisions made, actions taken, and stages involved in removing the product for the end client, should be well documented to form evidence for the business decisions that are made as a result of Consumer Duty.
Moving on from 'Day 2' plans, since Consumer Duty went live, firms can benchmark against industry standards and see what competitors have done to gauge the effectiveness of their own implementation. This stage of quality assurance is critical to understanding where firms will sit in the FCA’s future analysis of ‘Good Practice’ or ‘Improvement Areas’. This will help firms in prioritising tasks within their 'Day 2' plan and/or BAU strategies to meet the industry standard. Over the past 12 months, questions we have seen firms asking themselves stem from the underlying question of “What does good look like in real life”. Now, for the first time, we will be able to get a view of industry best practices and a more holistic understanding of what delivering good outcomes in real business practices looks like. The FCA will want to see that firms are considering information stemming from the higher industry standard and making business decisions that will demonstrate that firms are learning as a result of the feedback they are receiving. Upon request, firms must be able to provide evidence quickly and in a consistent format that can be easily interpreted by the regulator. Moreover, quality assurance will offer insight to firms on where they stand in the industry with respect to FCA’s evolving competitive environment, shifting from cost and profit goals, to consumer-driven objectives such as reputation and customer satisfaction.
Firms will continue to learn from and develop their BAU strategies over the next 12 months, but they will need to use the next months to obtain as much feedback from every perspective, including the distributor, manufacturer, customers, or teams within the business, to capture all angles efficiently under the Duty.
How we can help
Delta Capita’s Consumer Duty experts have been helping firms deal with the complexities of the rule Duty from Day 1. We have helped firms assess readiness against the rules, deliver key changes and plan for the requirements of 2024 and beyond. If you’d like to know more about how we can support you with Consumer Duty, please contact us.
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