The Consumer Duty Board Report Deadline: are you there yet?

An echo of the plaintive cry from a child in the back seat of the car. 

As we approach the 31st July deadline for the Consumer Duty Board Report, it is vital that financial advisers are well on the way to having:

• gathered the MI;

• consolidated what demonstrates the embedding of the Consumer Duty in your firm; and

• identified what indicates that there is still work to do. 

Evidence is the key to supporting the conclusions of the report.  If there are indicators that tell the business that there are areas in which it has fallen short, what plans are in place to meet the gaps and what are the timescales for implementation?

The length of the report will be proportionate to the size and complexity of your firm.  It is recommended that you write the report in seven sections with the supporting MI in appendices:

1.   Executive Summary

2.   Culture and Purpose of the firm

3.   Consumer Outcome Monitoring

4.   First Line Oversight

5.   Second Line Oversight

6.   Alignment to Business Strategy

7.   Board Approval

Appendices with the MI that supports the conclusions of the report

This blog will remind you of the essentials of the Consumer Duty, its implications, and the steps you need to take to meet the Board Report deadline effectively.

A bit of revision

The FCA marketed the Consumer Duty as a significant shift in how financial services firms are expected to treat their customers.  The Consumer Duty sets higher and clearer standards of consumer protection across financial services and requires firms to put their customers’ needs first.  The key components of the Consumer Duty include:

1. Consumer Principle: Firms must act to deliver good outcomes for retail clients (Principle 12).

2. Cross-cutting rules: Firms must:

• Act in good faith towards retail customers;

• Avoid causing foreseeable harm; and

• Enable and support customers to pursue their financial objectives.

1. Four outcomes: Firms must ensure:

• Products and services are fit for purpose;

• Prices represent fair value;

• Consumers receive suitable and transparent communications; and

• Consumers receive the support they need.

The Importance of the Board Report

The Board Report is a critical element of the Consumer Duty.  It serves as a self-assessment tool for firms to evaluate how they have embedded the Consumer Duty in the first year.  From next year it will annually inform the Board how the firm continues to meet the requirements of the Consumer Duty.  The report should provide a detailed analysis of how the firm is ensuring good consumer outcomes, highlighting any areas of improvement and the steps being taken to address them.

For financial advisers, this report is not just a regulatory requirement but an opportunity to demonstrate commitment to client-centric practices.  It underscores a firm's dedication to transparency, fairness, and overall consumer well-being.

Key Components of the Board Report

To meet the FCA's expectations, your Board Report should cover the following areas:

1. Governance and Oversight: Detail the governance structures and processes in place to ensure compliance with the Consumer Duty.

2. Product and Service Design: Explain how products and services are designed to meet the needs of target consumers, including any testing and review processes.

3. Pricing and Value: Describe how pricing structures ensure fair value for consumers, and outline any changes made to improve value.

4. Consumer Understanding: Highlight how communications are designed to be clear, transparent, and effective in helping consumers make informed decisions.

5. Consumer Support: Provide insights into the support mechanisms in place to assist consumers, including how issues are resolved and how continuous improvement is ensured.

Steps to Prepare for the Deadline

Depending on the size of your firm, you should be almost completing step 5.

1. Review Internal Processes: Conduct a thorough review of your existing processes to ensure they align with the Consumer Duty requirements.  Identify any gaps and confirm when any necessary changes will be implemented.

2. Engage the Board: Ensure that the Board of Directors is fully informed and engaged in the process.  Their involvement is crucial for governance and oversight.

3. Document Evidence: Collect and document evidence of how your firm meets each aspect of the Consumer Duty.  This will be essential for your Board Report.

4. Train Your Team: Ensure that all staff members are aware of the Consumer Duty and understand their role in delivering good consumer outcomes.

5. Draft the Report: Begin drafting the Board Report, focusing on the key components outlined by the FCA.  Be honest about areas of improvement and proactive in outlining steps to address them.

6. Seek Feedback: Before finalising the report, seek feedback from key stakeholders to ensure it accurately reflects your firm's commitment to the Consumer Duty.

Conclusion

The 31st July deadline for the Consumer Duty Board Report one week away!  By understanding the requirements and taking proactive steps to ensure compliance, financial advisers can meet and aspire to exceed regulatory expectations and also enhance their reputation for putting clients first.  The Consumer Duty framework offers a unique opportunity to strengthen client relationships and build a more consumer-focused business model.

As you prepare your Board Report, remember that the ultimate goal is to foster trust and transparency with your clients.  By doing so, you will comply with the FCA's requirements and position your firm as a leader in ethical financial advice.

How can we help

If you would like Compliance Matters UK Limited to help you get your Board Report over the line, schedule a free, no-obligation consultancy call with us today. 

To learn more about how Compliance Matters UK Limited can support your firm, click here. 

To learn more about our T&C Support, including access to the Skillcast platform, click here.