The consumer duty should make life easier for firms and consumers as clearer expectations will be set out upfront, the FCA has said.
Speaking at the Westminster Business Forum yesterday (June 26), Emily Shepperd, chief operating officer and executive director of authorisations, said the consumer duty puts the onus on financial service firms to design their goods and services with good consumer outcomes in mind from the start.
The higher standard of the duty and the shift to focusing on customer outcomes will require a significant change in many firms’ cultures, Shepperd explained.
“Firms’ boards and senior management, if they haven't already, will have to embed a culture in which good outcomes for consumers is central.
“People management policies and practices, including performance management, pay and bonuses will be critical to doing so.
“Firms can expect at every stage of the regulatory lifecycle to be asked to demonstrate how their business model, the actions they have taken, and their culture are focused on delivering good customer outcomes.”
The FCA said investors are increasingly demanding that they put their money towards "doing some good" for people and our planet.
“Look at the Norwegian Sovereign Wealth fund, which on average owns 1.5 per cent of every listed company in the world,” Shepperd said.
“For decades it was worried about being too outspoken, but in recent years started declaring its voting intentions at the annual meetings of all 9,000 companies it owns.
“Alongside this, it’s stepping up its demands for all companies to set carbon emissions targets, and recently filed shareholder proposals on climate for the first time.”
Shepperd said the FCA’s work on sustainability disclosure requirements and investment labelling is crucial.
“We are determined to clean up ‘ESG’ and ‘sustainability’ classifications, restoring credibility and confidence to the system, before cynicism destroys what is a potentially huge and beneficial market,” she said.
“Culture is not just the slogan on your website. It is the very essence of what your organisation stands for, embodied by how it conducts itself.”
The regulator’s expectations of firms are evolving and keeping up with the demands of consumers.
“They expect us – and firms – to do more, to do better,” Shepperd said.
“When parliament mandated us to create the consumer duty, we took the opportunity to change our approach, to do this in a way that was less prescriptive and more outcomes-driven.”
Purpose underpins culture
Shepperd said culture is something that remains central to the regulator’s supervisory model.
“It is what underpins outcomes – firms with healthy cultures will be best equipped to adapt to a changing world and to consumers with changing expectations,” she said.
Culture underpins conduct and therefore business performance and confidence which is why to work at a senior level in financial services, the FCA requires an individual to pass and continue to meet the conditions of a fitness and propriety assessment.
