The regulator is expecting its flagship piece of legislation to drive cultural change through the sector. However, from recent polls conducted during our popular Consumer Duty webinar series, it is apparent that some firms may not have interpreted the legislation in this way and now find themselves at a cultural crossroads.

Just under half (44%) of 124 compliance and risk professionals polled in September 2022 stated that ‘developing a culture that takes a joined-up approach to customer propositions’ was the joint primary challenge they were facing alongside ‘conducting a gap analysis between current processes and the new rules’ for implementing Consumer Duty [1].

Throughout our Consumer Duty webinar series we have also found some recurring and problematic themes garnered from our extensive poll sentiment feedback. With a lack of ‘credible data feeds’, over reliance on ‘lagging indicators’, and little evidence of genuine ‘change or uplift’ occurring within some firms and their respective business models, it came as little surprise to find that 77% of 433 compliance and risk professionals polled in March 2023 felt they were only ‘somewhat’, ‘slightly’ or ‘not confident at all’ that they have ‘the appropriate data/ MI available’ to meet Consumer Duty obligations [2].

To compound matters, recent ‘Dear CEO’ letters from the FCA have caused consternation and rattled many in the sector; particularly in relation to ‘relying on current data sources and establishing new sources of data’ [3].

As a result, many firms are now faced with the prospect of conceding that they simply will not be “Consumer-Duty ready” come 31 July 2023; and are pondering just how they are expected to achieve such sweeping change.

Why good outcomes depend on your people

In our latest Consumer Duty webinar in May 2023, we asked 246 participants – which included compliance, risk, oversight, T&C and operations professionals – how confident they felt that their people actually have the knowledge and competence required under Consumer Duty.

67% stated they were ‘not confident’, ‘slightly confident’ or only ‘somewhat confident’. To give this additional context, just 1% of poll participants stated they had ‘high confidence’ that their people possessed the required knowledge and competence needed to deliver against Consumer Duty obligations [4].

In April 2023, I was joined by Frank Brown – Director at GRR Consulting – for a webinar to discuss the ‘people aspects’ of the Duty; paying particular attention to competence and the role that it plays within the First Line of Defence to deliver good outcomes to customers. Critically, let’s not forget that these are the very people in your organisation at the sharp end – owning the risk – charged with delivering fair customer outcomes to a diverse and frequently vulnerable group of consumers.

In our post-webinar discussion piece (available to access here), Frank made an important observation which may well resonate with you: “We have an interesting split between the way elements are tested within firms in terms of competency. I mean, we have a sort of ‘rules-based’ testing – ‘rules-based’ competency – against a principles-based regulation. So, a much more qualitative approach is incredibly important – and that’s a real shift for a lot of organisations.”

We concluded that perhaps two critical areas that have been overlooked by firms – which are now quickly becoming major causes for concern as we draw closer to 31 July 2023 – is the robustness, readiness and capability of first-line employees to deliver against Duty expectations, alongside the availability of new, granular, qualitative sources of data and MI pertaining specifically to first-line employee competence.

To read more, please access ‘Consumer Duty: culture crossroads’.

Sources:

1: Elephants Don’t Forget, ‘Consumer Duty – it’s closer than you think’, webinar poll, 14 September 2022. 124 professionals polled

2: Elephants Don’t Forget, ‘How to approach Management Information (MI) for Consumer Duty’, webinar poll, 29 March 2023. 433 professionals polled.

3: FCA, ‘FCA supports firms through the transition to implementing the Consumer Duty’, available here.

4: Elephants Don’t Forget, ‘How to successfully approach Training & Competency (T&C) under Consumer’, webinar poll, 24 May 2023. 246 professionals polled.