Welcome to the fourth day of our week-long editorial series celebrating the anniversary of the Consumer Duty (CD). Yesterday we focused on the role of AI in implementing CD and what part it will play in the future, which you can find here! Each day we’ll continue to explore different facets of how Consumer Duty has reshaped compliance, business practices, and customer outcomes across financial services.
This anniversary marks a significant milestone, reflecting on the strides made by firms to prioritise consumer needs and deliver good outcomes. Our series will cover the necessary changes in compliance, the role of technology in supporting CD, the importance of data and analytics, the impact on customer engagement, and the future outlook for Consumer Duty.
Day 4: Do you believe CD has been a positive step for the industry and customers overall?
Today, we explore industry perspectives on whether Consumer Duty has been a positive step for the industry and customers overall. Insights reveal widespread agreement that the regulation has elevated consumer protection, accountability, and transparency. While implementation posed challenges, the long-term benefits of improved customer outcomes, trust, and industry innovation are evident. The focus remains on maintaining high standards and fostering a culture of continuous improvement.
Chris Jones, Chief Product Officer at Dynamic Planner said: “Yes overwhelmingly, if it wasn’t in place, it would still be good business practice and if it were repealed its replacement would probably demand similar things. It is in place and it’s up to everyone in the industry to make it a positive step.”
Andrew Gething, managing director of MorganAsh, said: “In its first year, it’s fair to say Consumer Duty has received a mixed response from the sector – while some have really seized the opportunity to stay closer to clients and deliver far better outcomes, others are still yet to fully demonstrate the change the FCA wants to see.
“Perhaps the best example is in their approach to identifying and monitoring vulnerable customers and ensuring the outcomes they receive are no worse than the resilient. While the FCA suggests that as much as half of all UK adults are vulnerable in some way, many firms are still reporting few or even zero vulnerable customers. It’s clear therefore that many firms still lack the technology and processes critical to gathering the necessary data to meet this requirement.
“One year on, many firms are still yet to fully grasp the opportunities of available technology to turn Consumer Duty from a regulatory requirement and into a competitive advantage. Platforms exist to not only assess and monitor consumers in a consistent and objective way, but to build all the necessary management information to meet reporting requirements. Systems such as MARS (the MorganAsh Resilience System) can even offer suitable next steps at the very moment vulnerable characteristics are identified – helping firms deliver a stronger, more valuable service that engenders customer loyalty.
“There will always be those firms hoping to skate under the radar, or believe they are ‘too small’ to worry the regulator under proportionality rules. The FCA confirmed yesterday that it is taking a collaborative approach to assist firms in their adoption of Consumer Duty, in recognition of it being a major change. Equally, the regulator confirmed it will enforce the new regulation, especially where it has informed firms they need to make improvements. While much focus has been on meeting Consumer Duty, attention is now turning to how Duty can help firms better understand and meet their customer’s needs, demonstrate good outcomes and gain a competitive advantage.”
Legal & General’s retail division shares the following comments: “It’s our view that the introduction of Consumer Duty has led to a higher standard of consumer protection. It raises the bar for all those who service retail customers, right from product design to distribution, servicing and customer support. Firms must now have evidence that they are “acting to deliver good customer outcomes”. We and many other firms already had a strong customer focus, and it goes further than just compliance with the regulation, giving us further opportunity to hold ourselves accountable in delivering good customer outcomes”
Sebastien Petsas, Managing Director of Financial Services Compliance and Regulation at Kroll said: “Across the industry, the Consumer Duty has promoted a greater level of accountability and transparency in organisations, which ultimately benefits consumers in a huge way, improving products, services, and communications.
The Consumer Duty also reflects a significant development for the regulator, codifying the responsibility that financial services firms hold to consumers, which has long been an important, but less formalised, watchword for the FCA. The duty makes consumer protection and fair treatment a priority for organisations, which in turn drives companies to enhance their wider practices.
While preparing to meet, and then meeting, the requirements of the Duty has posed some challenges over the past two years or so, the long-term benefits of increased trust and customer satisfaction in the financial sector mean that it has had an overwhelmingly positive impact.”
Michael Shand, Managing Principal at Capco said: “Consumer Duty has been a positive step for the industry, challenging firms to be more creative and innovative in delivering better customer outcomes. This journey will take multiple years to ensure the entire industry shifts its way of working, however, the last 2 years have demonstrated the potential for change regarding customer centricity. The real challenge lies in carefully balancing the cost versus benefit of transformation and ensuring that firms make efficient decisions on strategic changes that will act as enablers for the future.
Firms across the sector are taking Consumer Duty seriously, resulting in benefits for customers through better products and services. This has enabled firms to highlight decisions and improvements made in response to insights gained from the Duty. It’s crucial that the cultural shift intended by the FCA continues, with a growing focus on making decisions that deliver good customer outcomes.”
Mandeep Bhandal, Senior Policy Adviser at the Investment Association, reflects on the significant milestone: “The introduction of Consumer Duty a year ago represented a significant regulatory shift. The investment management industry has worked extremely hard to meet the final stage of implementation, with a key focus on the preparation of the first annual board report. As we reflect on this journey and embed Consumer Duty, we look forward to working with the regulator, our members and other stakeholders in the retail distribution chain to continue to promote enhanced customer delivery based on high standards of governance and culture”
What’s the consensus?
The introduction of Consumer Duty has generally been perceived as a positive and transformative development in the financial industry. It has significantly raised the bar for consumer protection by demanding higher standards of accountability and transparency from financial firms. The regulation ensures that firms not only comply but also actively demonstrate their commitment to delivering good customer outcomes across all aspects of their operations, from product design to service delivery.
This regulatory shift has encouraged firms to be more innovative and customer-centric, challenging them to continuously improve their practices. While the implementation process presented challenges, particularly in aligning existing practices with the new requirements, the long-term benefits are substantial. Increased trust and satisfaction among customers are notable outcomes, reflecting the regulation’s success in fostering a more transparent and accountable industry.
Consumer Duty represents a major step forward for regulatory standards and is seen as a catalyst for further innovation and improved customer service. As firms continue to adapt and integrate these changes, they are expected to uphold high standards of governance and further enhance their customer engagement and outcomes.
