After over a year of planning, the FCA has announced a new Consumer Duty. Aimed at providing consumers with increased protection, the change focuses on the ways that firms interact with customers at every stage of the customer lifecycle.

Under the new guidelines, firms are expected to communicate to consumers in a way that is easy to understand, deliver products and services that meet their needs, offer fair value, and provide customer support as and when needed.

The new Consumer Duty consists of the following three elements:

One consumer principle:

“A firm must act to deliver good outcomes from retail clients.”

This overarching principle summarises what is expected of firms. Failure to comply with it may lead to FCA enforcement, fines, and reputational damage.

Three cross-cutting rules:

To act in good faith toward retail customers.
To avoid foreseeable harm to retail customers.
To enable and support retail customers to pursue their financial objectives.

These provide added clarity on the consumer principle and help firms interpret the four outcomes (below). The rules develop three common themes (acting in good faith, avoiding harm, providing supporting), which should be applied across all areas of an organisation’s conduct with its customers.

Four outcomes:

Products and services – products should be fit for purpose and work as expected.
Price and value – products and services are to be sold at a price that reflects their value.
Consumer understanding – consumers are equipped with the relevant information to make informed decisions.
Consumer support – customer service should be responsive and helpful.

These give extra detail on what is expected of firms at each stage of the customer lifecycle. By responding to each of these outcomes, firms can meet the consumer’s financial needs and improve their financial wellbeing.

What does this mean in practice?

A range of parties will be impacted by this update, including regulated firms, consumer organisations, industry groups, policy makers, and regulatory bodies. In practice, it is hoped the Duty will do the following:

End rip-off charges and fees.
Make it easier to switch and cancel products.
Make customer support more helpful and accessible.
Ensure firms provide more timely and clear information.
Make firms provide products and services that are right for the customer.
Ensure that firms remain committed to the customers’ diverse needs.

The updated Duty reflects the FCA’s aim to become a more assertive and data-led regulator. With the added focus on firms meeting their customers’ needs, the FCA will be able to quickly identify which practices are not meeting the standards set by the Duty and take action, before such practices become entrenched.

You can find out more about the new Consumer Duty on the FCA’s website.

How does this impact L&D practitioners?

Nearly all financial organisations will be impacted by this new Consumer Duty. Firms are required to review their current approaches and have systems in place to remedy any issues.

As a result, some compliance learning will have to be reviewed and updated, particularly customer-focused modules such as those related to fair treatment, customer conduct, and vulnerable customers. Practitioners will also have to be on hand to deliver additional refresher training to ensure standards aren’t simply achieved, but also maintained.

Finally, practitioners should also note that this update looks beyond traditional tick-box compliance. In order to meet the standards set out by the FCA, firms need to address their employees’ soft skills in areas such as communication, selling, and customer management. An approach that balances compliance and soft skill content is recommended, so that firms can respond to the principle, rules, and outcomes of the updated Duty.

How can Sponge help?

Time is of the essence! The FCA is giving firms 12 months to implement the new rules for new and existing products, with the new rules being extended to closed book products 12 months later.

Therefore, it is important to pick a learning solutions provider with a proven track record in finance, with both compliance and soft skill know-how. Book a call today, to see how we can support your organisation in meeting the requirements of the Consumer Duty update.