There are under 90 days until the start of the Consumer Duty; it is a timeline that has seen the Financial Conduct Authority (FCA) urging all firms to ensure they are ready for the July 31st deadline.
In encouraging firms to ensure they make all efforts to be ready for the deadline, the FCA warned that firms who ignore the Duty or who pose the most harm can expect swift action, noting, “Our supervisory and enforcement approach will be proportionate to the harm – or risk of harm - to consumers.”
In a speech to mark the countdown on May 10th, the FCA’s Sheldon Mills, highlighted some areas of preparation that may help dealers and brokers to ensure they are on the right path by sharing some of the type of questions firms should already be asking themselves:
- Does your purpose and culture align with your obligations under the Duty and support the delivery of good outcomes for customers?
- Is the Duty being considered in all relevant discussions such as strategy, remuneration and risk?
- Have you made sure your remuneration and incentive structures drive good outcomes for customers?
- Are you prioritising delivering good outcomes for customers in a changing external environment?
If the answer is anything than a confident yes, then work is required.
Area of focus: Fair value
The FCA highlighted Price and Value, one of the four key outcomes that firms need to assess under the Consumer Duty, as an area they have heard regularly is the area that firms are finding the hardest to understand.
To help, the FCA has undertaken a review with their firms' fair value frameworks and provided some additional clarity based upon their review as follows;
The price and value outcome is based on ensuring the price the customer pays for a product or service is reasonable compared to the overall benefits.
The findings of our review suggest that some firms may not be able to give us adequate evidence for why their products or services provide fair value.
Some firms didn’t seem to be properly considering outcomes for different groups of their consumers, relying instead on broad averages. This could hide where certain types of customers – such as those on low incomes or in vulnerable circumstances - are receiving poor value – perhaps because they are unable to benefit from important product features, or are more likely to pay charges, such as late payment fees.
Some firms didn’t seem to be challenging themselves enough on uncomfortable questions – such as, are high profit margins on a specific product a sign that those customers are not getting fair value? Of course, profit is not a bad thing, and it is possible to deliver both fair value and profit. We expect to see all firms taking an honest and critical approach to their fair value assessments.
At MotoNovo, our team continues to work hand-in-hand with our dealers and brokers to support and signpost support and information. We hope this latest news is of further assistance.
The latest FCA article is available here.
Debbie McKay, Commercial Director of Motor Sales