TURN Consumer Duty

Understanding the FCA’s Consumer Duty

The FCA’s new Consumer Duty represents a significant shift in regulatory expectations. This Duty introduces a new Consumer Principle, requiring firms to “act to deliver good outcomes for retail customers,” supported by three Cross Cutting Rules and four key outcomes that define the firm-consumer relationship. These measures provide a clear framework for firms, ensuring they understand the standards expected of them, while consumers can expect fair treatment from firms.

What is Consumer Duty?

The Consumer Duty is designed to make firms consider their actions from the customer’s perspective, asking themselves if they would be satisfied with the treatment their customers receive. Firms must act to facilitate good outcomes and continuously assess the effectiveness of their actions, aiming to “get it right in the first place.” This Duty applies to all firms involved in distributing or manufacturing products and/or services for retail customers, regardless of whether they have a direct relationship with the end customer. It forms a crucial part of the FCA’s 2022-2025 strategy.

Key Components

  1. Consumer Principle: Firms must act to deliver good outcomes for retail customers.
  2. Cross Cutting Rules: Firms must:
    • Act in good faith towards retail customers.
    • Avoid causing foreseeable harm.
    • Enable and support retail customers to pursue their financial objectives.
  3. Four Outcomes: These outline the core elements of a firm-consumer relationship:
    • Products and Services
    • Price and Value
    • Consumer Understanding
    • Consumer Support

Implementation and Expectations

The wide-ranging proposals require firms to review their product suite, communications, and customer journey. They must also consider changes in governance, accountability, MI and reporting, product design, pricing, distribution, servicing, and staff training—all within a tight implementation timeframe. The final rules and guidance, released in July 2022, clarify how the Consumer Duty will be implemented across different sectors. These measures are principles-based, allowing firms to determine a proportionate and reasonable response to the Duty.

Preparing for Compliance

The introduction of Principle 12 and its supporting rules places greater emphasis on attaining good Consumer Outcomes. Firms must consider how following existing guidance helps meet the new enforceable rules from July 2023. TISA’s Good Practice Guide aims to assist firms, especially in the savings and investment sectors, in understanding their obligations under the Consumer Duty. This guide addresses challenging areas of the Duty and offers practical application considerations.

Collaborative Approach

TISA continues to collaborate with industry stakeholders to identify areas where a more standardized approach could benefit firms in the distribution chain. This ongoing work will help refine the implementation of the Consumer Duty. The guide is the result of contributions from various firms and individuals, notably Abrdn, Aegon, Baillie Gifford, BNY Mellon, Hargreaves Lansdown, and Model Office.

For more information on how TURN can support your compliance with the Consumer Duty, explore our offerings and connect with us to learn more.