Small firms have made significant progress with Consumer Duty but there is still “much room” for improvement ahead of the imminent closed products deadline, says the Financial Conduct Authority.
In a speech made this week, Sheldon Mills, executive director, consumers and competition at the Financial Conduct Authority, said: “Many firms have already made great progress on the Duty. For example, they are offering the right products and services to the right customers; eradicating jargon and moving clients to less bespoke and cheaper options where that is a better fit.
“Of course, we have identified there is still much room for improvement. We do not want to see firms waiting to see if we will intervene to address an issue.”
With the clock ticking for closed products, which will come under the Consumer Duty at the end of July, the FCA said firms need to “get serious” about their data and not assume they can just repackage existing information.
Arguably the biggest hurdle firms have faced is that of fair price and value. On a positive note, Mills said 37% of advice firms have reviewed or changed their fees structure since the Consumer Duty was introduced. However, Mills said many of the fair value assessments are not relying on solid data and other credible evidence to justify the products’ value to retail customers.
Mills said: “We want to see firms considering all the aspects of fair value at the product level and considering the impact on different consumers. Board reports will come under greater scrutiny as we look to these to evidence the steps firms are taking to drive good outcomes.”
Mills said that while firms have applied their laser focus on open book products, they need to turn their attention to closed products in order to meet the 31st July deadline.
Firms were given an extra year to comply with the Consumer Duty for closed books because of the complexity of older systems and the increased work involved.
Mills said firms need to have a plan for how they will evidence that they are delivering good outcomes for customers who hold closed products but they face a number of challenges, including gaps in customer data, determining fair value on closed products and taking action relating to less engaged and the ‘gone away’ customers.
