Urgent Compliance Reminder for FCA Consumer Duty Regulations
With less than 6 months remaining until Financial Services firms are legally required to fully comply with the Financial Conduct Authority’s (FCA) Consumer Duty regulations, there is no room for complacency.
Understanding the FCA Consumer Duty
The FCA Consumer Duty mandates that the Financial Services industry must now gather comprehensive data on customer needs, characteristics, and objectives. Firms are required to demonstrate ongoing compliance by proving that their products and services align with the needs of their customers based on the collected data.
By 30th April 2023, firms should have reviewed all their existing products and services to ensure compliance by the 31st July 2023. This compliance requirement will extend to cover closed book products and services from 31st July 2024.
What This Means for Financial Services
The primary principle of the Consumer Duty is to “act to deliver good outcomes for retail customers.” This implies that Financial Services firms must prioritise consumer protection by ensuring their communications are clear and their products meet customer needs.
Challenges with Legacy Systems
Legacy systems may hinder firms’ ability to access up-to-date, holistic customer data, affecting the accuracy of critical gap analyses needed to identify compliance shortfalls. These systems impact areas such as customer journeys and product lifecycles.
Impact on Retail Banks, Building Societies, and Credit Lenders
Firms must assess their entire distribution channels to gauge Consumer Duty compliance throughout the distribution chain. The scrutiny on customer fees, charges, and service quality will intensify as the Consumer Duty is implemented. The current cost-of-living crisis further increases pressure on these firms to deliver positive outcomes.
Impact on Insurance Organizations
Insurance firms may be somewhat better prepared due to the Insurance Distribution Directive (IDD) but must still ensure full compliance with Consumer Duty regulations. Insurers must focus on consumer protection by offering understandable communications and appropriate policies. Utilising solutions like Dynamics 365 can provide a holistic view of customer data to meet these requirements.
Impact on Capital Markets
The Consumer Duty will enhance the role of technology in capital markets, pushing firms to ensure transparency and clarity about fees, performance, and risks associated with investments. Failure to meet these expectations could lead to reduced investments and reputational damage.
Key Considerations for Consumer Duty Preparation
- Customer Knowledge: Do you know your customers well enough?
- Customer View: Are you confident in your 360-degree view of customers to identify vulnerabilities?
- Marketing Platform: Can you target customers accurately to ensure compatibility with products?
- Onboarding and Pipeline: Do your processes gather relevant data on customer needs and objectives?
- Communication Monitoring: Are you able to track and report on customer communications and evolving needs?
Act Now to Ensure Compliance
Incremental collaborates with major Financial Services clients to implement solutions for marketing, onboarding, opportunity pipeline management, process automation, Know Your Client (KYC), and customer 360 needs using Microsoft Dynamics 365 and the Power Platform. We help clients manage internal and external processes to ensure compliance with Consumer Duty regulations.
With less than 3 months until the product and service review deadline and less than 6 months until full compliance is required, immediate action is essential. Contact us today to speak with a Financial Services expert about preparing for Consumer Duty compliance.