Three Gaps to Integrating Consumer Duty Principles Within UK Financial Organisations

The Financial Conduct Authority (FCA) is one of the UK’s regulatory bodies that sets requirements for the financial sector to maintain the integrity of financial markets. In 2022, they set the Consumer Duty, outlining outcomes-driven standards to protect consumers. It requires financial service providers to support customers in sound-decision making. Organisations will need to be able to prove the integration of Consumer Duty principles from the end of this month (the 31st of July 2023) onward.

Financial organisations, especially those that have limited capability or capacity to meet these principles, may need additional support in crafting and implementing their strategy. Larger organisations may struggle to shift their current ways of working and integrate and optimize operations to suit new principles.

Below, I’ve digested and included my impressions of the FCA’s summary of identified gaps in the integration of Consumer Duty principles, posted in January 2023. The below includes three key areas of opportunity and refinement that should be taking place this month and beyond if organisations are struggling to implement Consumer Duty plans and see results:

• Broadening the scope of engagement to include additional offices/departments, sponsors, and advisors. Fostering Consumer Duty in organisations requires cross-functional teams and leaders to support the development of and/or be aware of the changes taking place on a practical level. Plans run the risk of being crafted in silos that do not fit consumer need or organisational aims, making them vulnerable to ill or poor adoption of Consumer Duty principles. To further drive plans home, clear roles and responsibilities that are upheld and clearly grounded in the organisation’s reality are required. This includes clear ownership across requirements, and engaged sponsors at the leadership level.

• Focusing on how to optimally meet the Duty requirements. Instead of trying to fit Consumer Duty principles into current organisational processes and operations retrospectively, having a clear ‘North Star’ means crafting an optimised way of working under new Consumer Duty requirements and then supporting the transitions that need to take place between the current state and desired state one step at a time. Current data strategies are often not suited for integrating Consumer Duty principles. Building knowledge of the types of data that would be required to monitor integration and building feedback loops and enhancement processes are necessary to ensure Consumer Duty outcomes are continually upheld and can be advocated for.

• Identifying how the current state differs from the required state on a practical level. Approaches must have clear methodology, details, and timelines, which comes about from robust gap analysis and discovery. Resourcing, analysis, budgeting, technology review and procurement if necessary, contingency plans, training and awareness building, perception, and many other areas can be considered when bridging this gap.

Without engagement, optimisation, and practical-grounding, plans run the risk of getting retrofitted in, creating friction with other business goals, or being shelved. Embedding design- and strategy- level Change makers into planning and continuous improvement efforts can help financial providers on their journey to integrate principles of Consumer Duty, in a way that bolsters their competitive advantage while also promoting better consumer outcomes.

I’m curious to see how the financial industry will shift based on this Duty; whether true transformation takes place has yet to be seen.