The new Duty, described by the FCA itself as a “paradigm shift”, asks firms not only to deliver a higher standard of care and protection for customers, but also to “act to deliver good outcomes for retail customers”.
It requires firms to assess, test, understand and evidence the outcomes their customers are receiving.
HR and regulatory compliance:
The long-established principle of caveat emptor – ie, that the buyer alone is responsible for checking the quality and suitability of goods or services before a purchase is made – is not sufficient in today’s complex financial markets.
The new regulations will require firms to review their product suite, communications and end-to-end customer journey, and to consider changes in areas including governance, accountability, reporting and staff training.
This wide-ranging duty therefore has huge ramifications for firms, particularly on HR departments on whom the greater burden of ensuring compliance will fall.
They will need to ensure their colleague policies (disciplinaries, for example) reflect the Duty requirements. They will need to record any breaches of the Duty, what action was taken, and be able to report on this if required.
One of our HR clients in the financial services sector, which has been using our Workpro HR case management system for nearly six years now, has recently had to add 22 new categories to its software to enable it to specifically track breaches of the Consumer Duty regulations.
The FCA has issued 10 key questions for firms to consider before the deadline. Not all are directly related to the HR function, but there is a requirement for all areas of the business to consider their role in compliance with the Duty.
Key question 9 asks if individuals throughout the firm – including those in control and support functions – “understand their role and responsibility in delivering the Duty”.
The answer is that companies must ensure that the interests of their customers are central and that the Duty is thoroughly embedded and considered wherever any decision might impact on customers.
The new system means that HR departments will need to undertake, if they have not already done so, a root and branch review of their activities and processes, including:
- Training and competence: keeping and analysing records of staff training, including remedial actions where staff knowledge or actions were found to be below expectations.
- Whether processes and policies are effective in delivering good outcomes for customers.
- Job descriptions for relevant staff to ensure responsibility for the new Duty is embedded appropriately.
- Staff incentives, performance management and renumeration to ensure they are consistent with delivering good outcomes for customers.
The FCA’s own surveys show that most firm are engaged and understand the requirements of the Duty, and are on track with implementation, though a minority still has significant work to do and needed to accelerate their planning and implementation.
The need to demonstrate good outcomes will mean complaints monitoring and learning lessons are particularly important, and seeking the right professional advice should be the first step as the FCA’s deadline approaches.
Simon Laxton is business relationship manager at Workpro