Microsites

Consumer Duty – key considerations

Consumer Duty relates to the culture of a firm and requires a higher standard of care and expectations of firms:

  • The emphasis to deliver good outcomes should be embedded across the firm, business model and culture, with processes and policies aligned to the Duty helping firms meet their annual board report obligation.
  • The Duty introduced a new principle for business: Under Principle 12 (Consumer Duty) a firm must act to deliver good outcomes for retail customers. Firms are expected to comply with Principle 12 (and related rules/guidance in PRIN 2A).
  • The Duty also introduced a new conduct rule for SMCR Code of Conduct sourcebook (COCON), establishing responsibility for all conduct rule staff in ensuring the firm complies with the Duty: You must act to deliver good outcomes for retail customers.
  • Principle 12 is underpinned by three cross cutting rules and four outcomes aimed to provide greater clarity on the FCA’s expectations to drive a higher, consistent level of good outcomes across the industry. The cross-cutting rules state a firm must:
      • Act in good faith toward retail customers.
      • Avoid causing foreseeable harm to retail customers.
      • Enable and support retail customers to pursue their financial objectives.
      • Adhere to additional obligations in COCON reflecting the cross-cutting rules.
  • Firms must give consideration to the four outcomes: products and services, price and value, consumer understanding, and, consumer support.
  • These outcomes set out key elements of the firm-consumer relationship and are inter-related: meeting obligations under products and services and consumer understanding may help firms to evidence good outcomes and fair value.
  • Evidencing compliance is vital and use of data (reporting and management information) will be key to meeting requirements: firms need to ensure they document and record their processes, decision making and ongoing monitoring of products, services and procedures.
  • Existing compliance processes for SMCR, treating customers fairly and PROD can be enhanced to meet obligations under the Duty.

Read the FCA’s Review of Fair Value Frameworks (May 2023) where they consider best practice and areas for improvement in relation to: 

  • Understanding of fair value rules
  • Assessing value
  • Considering contextual factors
  • Assessing differential outcomes 
  • Data and governance

Click to expand.

Almost there...

Complete the quick form below to download the Membership Brochure