The 31st of July 2024 marked the final implementation deadline for the Consumer Duty (the Duty). The deadline included implementing the Duty for closed products and services and for firms to produce their first annual report on compliance with the Duty. It was also the first anniversary of the implementation deadline for firms’ open books.

To mark this milestone, the Financial Conduct Authority (FCA) hosted a webinar to share how firms have adapted to the Duty and their planned steps for the future.

Within this webinar, the FCA reflected upon the evidence they have seen of firms embracing the Duty and the positive and impactful changes this has driven. However, there was also a strong sense that firms, and the FCA, will each need to strive for continuous improvement.

In this article, we look both at what the Duty means for firms today and a look towards what the future might bring.

Eating the frog

At their webinar, the FCA commended the activity from companies grappling with implementing the Duty – “eating the frog” so to speak. In addition, they celebrated how far the industry has come, helping meet the FCA’s goals for the Duty [1].

We heard that the Duty has already become a catalyst for cultural change within firms. It has had positive impacts on firms’ internal governance, placing customers at the heart of decisions, which we expect to lead to better customer outcomes over time.

The FCA webinar shared examples of positive change observed within firms. These included:

• A financial advice firm implementing changes to simplify their charging structure, leading to better transparency and comparability with other firms.
• Firms acting to pass rate improvements on to consumers more quickly.

While there is mounting evidence of Consumer Duty already having a positive impact on the industry, it has attracted criticism for stifling growth and innovation within the UK’s financial services industry.

The FCA have responded by introducing measures to encourage innovation. For example, the recent pilot of a multi-agency AI and Digital Hub, which provides innovators with informal advice on complex regulatory issues.

Another challenge for the FCA has been to address the length and complexity of the rules that firms must comply with. This has long been considered a hurdle for smaller firms and new entrants. The FCA published a "Call for input" [2] on the 29th of July to explore where rules can be simplified. The implementation of the Duty has prompted the FCA to reflect on areas of perceived duplication or redundancy within the (goliath) rulebook, putting the FCA on its own journey of continuous improvement.

Overall, for firms that have embraced the Duty, the FCA believe that the past year has had its share of success, but there have been a few challenges along the way.

The next leap

With the final implementation deadline now behind us, we can consider how industry might leap forward under the Duty.

The FCA are focused on how firms demonstrate meeting the four outcomes of the Duty. Some of these have proved more challenging for firms than others, most notably the “price and value” outcome. Reflecting this, the FCA announced plans to conduct cross-sector thematic reviews, with a particular focus on how firms demonstrate price and value.

In addition, there will continue to be a focus on innovation. Sheldon Mills [3] stated that “balancing innovation with consumer protection while supporting the need to grow the economy is a crucial focus under our objectives” [4]. The FCA will be launching an AI Sandbox in due course with the aim of safely bringing digital and AI solutions to market.

The FCA will also continue to work closely with the Financial Ombudsman Service (FOS). Talking about “what success looks like” there was an aspiration that fewer complaints will be received, by firms and by the FOS. Speaking at the webinar hosted by the FCA on the 31st of July, Abby Thomas [5] highlighted that she hopes for all complaints to be dealt with effectively within firms.

This would take time, but she encouraged firms to not shy away from analysing complaints, citing this as a real chance for firms to improve their service to customers. Firms should be actively looking into complaints, listening to calls or reviewing customer correspondence. In doing so, they should adopt “the spirit of curiosity, enquiry and improvement”.

Firms should continue to monitor outcomes for consumers. In particular, the importance of “putting yourself in your customers shoes” to understand their issues, and the actions that firms should be taking to resolve these issues. This emphasised the importance of assessing against customer outcomes, with firms needing to consider a broad range of qualitative and quantitative data in forming their assessment.

Another measure of success, for the FCA, was to demonstrate growing trust within the financial services industry. The level of trust within the industry will continue to be monitored through the FCA’s Financial Lives survey [6] over the coming years.

The comments from the panellists on the webinar highlight that the ongoing implementation of the Duty should be an iterative process and that even though the deadline has passed, firms should not consider the implementation as being complete. We are continuing to see Consumer Duty drive developments and can expect to see this carry on into the future with the FCA announcing that they will be conducting a post-implementation review in the coming years.

Sheldon stated in his speech that “Consumer Duty was never going to be a once and done act [it’s] an ongoing journey for improvement”. Therefore, firms should now be routinely considering the Duty and the impact it will have on their business.

Whatever the Duty means for you, it has certainly caused a splash!

How Hymans Robertson can support you

For a conversation on how we can support you in relation to any of the above topics, including complaints analysis, innovation, or more generally around the Consumer Duty requirements, please get in touch with your usual Hymans Robertson contact or one of the authors.

This blog is intended for insurers, reinsurers, asset managers, banks, and building societies only. It is published for informational purposes only, and does not constitute advice.  

This blog is based upon our understanding of events as at the date of publication. It is a general summary of topical matters and should not be regarded as financial advice. It should not be considered a substitute for professional advice on specific circumstances and objectives. Where this blog refers to legal matters please note that Hymans Robertson LLP is not qualified to provide legal opinion and therefore you may wish to obtain independent legal advice to consider any relevant law and/or regulation. Please read our Terms of Use - Hymans Robertson.