In a rapidly evolving regulatory landscape, consumer duty has become one of the most significant shifts for financial services in decades. Jenny Hunter, Senior Financial journalist at IFA Magazine, sat down with Stuart O’Sullivan, Associate Director at Protiviti, to explore how firms navigate these changes, the challenges they face, and the critical role of data, technology, and continuous improvement in ensuring compliance. His insights shed light on the ongoing transformation within financial institutions as they adapt to new principles and expectations from the FCA.
Understanding the Consumer Duty shift
The Financial Conduct Authority (FCA) has described consumer duty as the biggest regulatory change in over 20 years. Stuart O’Sullivan points out that the shift moves firms from a rules-based approach to a more outcomes-focused, principles-based system. Traditionally, regulations relied heavily on disclosing information to customers, allowing them to make their own decisions. Now, the emphasis is on ensuring that firms offer the right products and services that deliver fair value and are easily understood by their customers.
“The fundamental shift,” Stuart explains, “is causing firms to rethink their business models, how they engage with customers, and how they go to market. This principles-based approach forces firms to focus on outcomes rather than simply ticking compliance boxes.”
This new regulatory landscape requires financial institutions to undergo significant changes in their internal processes, rethinking everything from customer engagement to pricing models. According to Stuart, these changes are already influencing how firms operate, and they are far from over.
Challenges in reporting and compliance
One of the primary challenges firms face is adapting to the new reporting requirements. Under consumer duty, every firm is required to submit a board report at least once a year detailing the outcomes delivered to their customers. This report is then used by the governing body to make strategic decisions and ensure ongoing compliance.
“Firms have struggled with understanding the level of detail required in these reports,” says Stuart. “There’s a tendency to repurpose existing compliance documentation, but the FCA is clear that this isn’t sufficient. The focus should be on customer journeys and product lifecycles, assessing both good and poor outcomes and how they can be improved.”
Stuart emphasises that firms need to move away from simply repackaging old compliance reports and take the opportunity to rethink their management information (MI) and how it is presented. The shift from a box-ticking exercise to a more thoughtful, outcomes-driven approach is a significant hurdle that many organisations are still grappling with.
The role of data and technology
Data and technology have become indispensable in the consumer duty landscape. Stuart highlights the importance of having the right data to monitor customer outcomes and ensure compliance. “The FCA has become more data-driven than ever before,” he notes, “and firms need to keep up.”
The FCA has been conducting in-depth reviews, often requesting a level of detail previously unseen, particularly regarding customer service and pricing. Without accurate, comprehensive data, firms will struggle to meet these demands.
Technology also plays a key role in ensuring compliance. “We’re seeing increasing use of artificial intelligence in areas like consumer understanding testing and product governance,” Stuart explains. “Firms are adopting AI tools to analyse marketing materials, customer interactions, and more. It helps them ensure that they’re meeting consumer duty requirements efficiently and effectively.”
In an industry where compliance has often been a slow, resource-intensive process, the integration of technology is helping firms stay ahead of the curve, reduce manual labour, and provide a more accurate assessment of their customer outcomes.
Focus on price and value
One of the most challenging aspects of consumer duty is the focus on price and value. Unlike previous regulations, which stopped short of pricing control, consumer duty requires firms to assess whether their products are priced fairly and deliver appropriate value to customers.
“The FCA has never been a price regulator,” Stuart remarks, “but consumer duty is pushing them into that space. Firms are now expected to assess their own products and determine whether they provide fair value, but the FCA hasn’t provided strict guidelines on what constitutes ‘fair.’ This lack of clarity means firms are left to develop their own frameworks, which has been a challenge.”
Stuart adds that many firms are benchmarking their prices against competitors rather than developing their own value assessments, a practice that could expose them to risk if they fail to meet the FCA’s expectations. This focus on fair value is expected to be an ongoing challenge for financial institutions as they continue to adapt to the new regulatory environment.
Continuous improvement over compliance
While compliance is critical, Stuart stresses the importance of firms adopting a mindset of continuous improvement rather than simply viewing consumer duty as another box to tick. “If firms only focus on compliance, they risk missing the larger opportunity to improve customer relationships, build trust, and ultimately strengthen their brand,” he says.
Consumer duty presents an opportunity for firms to rethink how they engage with customers, improve retention, and even increase cross-selling. By focusing on continuous improvement, firms can not only meet regulatory requirements but also enhance their competitive advantage in the market.
Conclusion
As consumer duty continues to reshape the financial services industry, firms must adapt to a more outcomes-driven, customer-centric regulatory environment. With the right focus on data, technology, and continuous improvement, financial institutions can not only meet the FCA’s expectations but also create lasting value for their customers.
Sometimes, though, it’s hard for firms to know where to start or how to go from thinking to doing. If that’s the case, then firms can benefit from the help provided by companies such as Protiviti. Protiviti specialises in helping organisations navigate complex challenges related to risk, compliance, and transformation. They provide tailored solutions to assist firms in implementing consumer duty regulations effectively and have an expert team on hand to help in whatever area firms may need support.
