The Financial Conduct Authority has brought in a new set of regulations called Consumer Duty which will increase the compliance burden for Financial Services firms.

As a result of Consumer Duty, the Financial Services industry now has a duty to gather relevant data on customer needs, characteristics and objectives. They must also be able to prove they are complying with these demands to the FCA on an ongoing basis. Additionally, firms must ensure that they are only marketing products and services to customers that they are compatible with, based on the data they have collected on the customer.

Consumer Duty will apply to existing products and services that customers buy or renew from 31st July 2023 and will be extended to cover closed book products and services from 31st July 2024.

What does Consumer Duty mean for my organisation?

Consumer Duty represents one of the largest changes to retail regulation in the FCA’s history and given the time the FCA has taken to create and implement, shows how seriously they are taking this change.

There are several principles within the duty but the overarching principle requires firms to “act to deliver good outcomes for retail customers”. This means Financial Services firms must focus on consumer protection by providing customers with communications they understand and products that meet their needs. This change will force and govern firms to put the fair treatment of its customers at the heart of its business and act in a way that reflects how customers behave and transact in the real world.

Some key questions the FCA is asking Financial Services firms to pose are:

  • ’Am I treating my customers as I would expect to be treated in their circumstances?’
  • ’Are my customers getting the outcomes from my products and services that they would expect?’

With Consumer Duty, Financial Services firms will be required to ensure that marketing and sales are not enacted to customers whose needs, characteristics and objectives for the product or service are incompatible. Instead, firms will need to obtain a deeper understanding of a customer’s circumstances, risk appetite and financial objectives to align them to appropriate products consistently throughout the lifecycle of a customer’s interaction with the firm.

Is your business ready for these regulation changes?

Telefónica Tech works with a number of large FSI clients to implement marketing, onboarding and opportunity pipeline management solutions with Microsoft Dynamics 365 and the Power Platform. We support clients with their process and data needs to ensure they are set up for success – allowing them to meet the data gathering, suitability assessment and communication requirements of Consumer Duty.

Key questions we are asking clients are:

  • ‘Does your marketing platform allow you to identify and target customers at a granular level to ensure you are marketing products and services that are compatible with them?’
  • ‘Do your onboarding and pipeline management processes allow you to gather the relevant data to understand customer needs, characteristics and objectives?’
  • ‘Are you able to monitor and report on communications sent to clients and how their needs have changed over time?’

 

If any of the above resonates with you, please reach out to us today to discuss how we can help your firm get ready for Consumer Duty.