The Financial Conduct Authority (FCA) is to survey 600 smaller firms to check how they are preparing for implementing the Consumer Duty.
The regulator also conceded it may have not adequately explained how the duty will benefit firms, but warned those firms trying to avoid complying that the duty would not be going away and the implementation deadline of 31 July will not be moved.
FCA executive director of competition and consumers Sheldon Mills (pictured) noted the survey of smaller firms followed its initial research among 60 of the largest firms in the market.
Speaking at the Countdown to Implementation of the Consumer Duty event hosted by Deloitte, Mills said: “We will be surveying around 600 smaller firms next to check how prepared they feel with their implementation plans.”
He added that for firms of any size applying the duty, after the deadline the FCA will take “a pragmatic approach and will help those who are taking their final steps towards meeting the standards of the duty”.
‘Think differently’
Expanding on the analysis of large firm implementation plans, Mills revealed the regulator had seen “so many” good examples of firms who have taken to the spirit of the Consumer Duty, but that some firms were struggling and were prioritising work that was not the most important.
“Some initial efforts to address the duty appeared superficial while others were over-confident in their existing systems,” Mills continued.
“In one example, there was no evidence of engagement with the firm’s chair or other non-executive directors, and the board only asked one question before approving the plan.
“In another example, board minutes showed that the plan was approved without discussion.”
Mills also issued a warning for the small number of firms that consider implementing the Consumer Duty too big a task and hope it will go away.
But he conceded there may have been initial resistance to the duty as the regulator had “not been great” at explaining what was in it for firms and UK Plc.
“An industry leader recently admitted to me that although on the face of it, the duty was a pain as it required work and resources, her directors were reporting that actually, it was proving to be a useful exercise,” Mills said.
“They were uncovering customers they had not engaged with for some time. They were hammering out plans for new products and services ahead of schedule.
“They started looking at potential problems far earlier – and importantly, identifying new opportunities earlier too.
“In all, it forced them to think differently. And what sparks innovation if not thinking differently?
“The benefits to industry and organisations are that the exercise itself will refine systems and ideas. Thinking differently and exposing yourself to meaningful change is at the heart of innovation.”
‘Demonstrate your business models’
Looking ahead, in the run up to the 31 July deadline, Mills said there was still plenty to do and the regultor would be looking for evidence from firms.
“Over the next five months, it will be essential for firms to work together across the manufacturing and distribution chain to deliver good outcomes,” he said.
“This includes where you may have outsourced the delivery of services to other parties.
“At every stage of the regulatory life cycle, we will ask you to demonstrate your business models, actions you have taken and how your culture is refocusing on good customer outcomes.
“We will be looking to see that consumers receive communications they can understand, are offered products and services that meet their needs and offer fair value, and they get the customer support they need.”
