The basic thrust of Consumer Duty is around best practices.

It is seen as a key facet of the FCA’s three-year strategy to drive good outcomes for consumers. A key part of that is that firms must be able to evidence compliance and in doing so collectively set a standard for the industry as a whole.

Firms need to:

• Act in good faith towards retail customers
• Avoid causing foreseeable harm to retail customers
• Enable and support retail customers to pursue their financial objective(s)
• Make sure they can deliver good outcomes overall business activities.

Consumer Duty will join up areas that currently are siloed and/ or have low visibility. In doing so the investment process from assessment of objectives through to investment performance will become more transparent and thus firms will have the ability to measure how they are doing when it comes to outcomes at each stage of the process.

Firms have a duty of care towards clients. To achieve this, they will need to assess how they will relate to customers not just through the products that are sold, but how they came to that point and decided what was and was not suitable. The onus is now on providers to tell their customers when they have something better or more suitable in their portfolio – and invite them to make the switch if they choose to do so.

They should also be able to pinpoint how and when they flagged the possibility of something going wrong, what they did about it and when.

This all forces best practice and is the core of Consumer Duty; positioning the right products and services to the right people at the right time and cost to achieve better outcomes across their financial lifecycle. 

To do this leveraging data and insight will become more important than ever. At each stage of the process there should be a check of the outcome – not just investment ones – and data available to enable root cause analyses of issues. And, if a firm cannot evidence that it evaluated the customer’s needs from a whole-of-life and holistic viewpoint then they fail in its duty. The means to aggregate the customer’s financial position, and automate the analysis for both the consumer and the provider is a must, so as to provide the data-driven insights that can underpin individual, personalised propositions, as well as evidence that those insights were provided and that the portfolio was properly monitored to avoid foreseeable harm and provide a positive outcome.

Without these data analytics capabilities meeting Consumer Duty requirements will be nigh on impossible. More than that, being compliant with Consumer Duty also represents an opportunity for growth via open-finance, data-driven and customer-centric business models that will position firms well to capture a greater share of wallet, provide operational efficiencies and position them well for profitability.

But have you readied your data collection and analytics capabilities? What do you need to do? Are you ready?

We will shortly be publishing our view of Consumer Duty – Seven Steps for Successful Outcomes.

If you would like to discuss any of the points raised here, please contact us at BITARisk@corfinancialgroup.com or see more information on our solution here.