The Financial Conduct Authority (FCA) has intensified its scrutiny of ongoing services in the wake of the Consumer Duty. This proactive stance has had significant implications for major firms like St James’s Place, which has allocated £426 million, and Quilter, which is undergoing a section 166 skilled persons review. As the FCA continues its rigorous oversight, firms must ensure their ongoing service propositions and processes are robust and compliant.

Consumer Duty: Understanding FCA’s Proactive Approach

The FCA’s recent actions underline its commitment to a data-driven approach in supervising the Consumer Duty. Its letter to the largest advice firms in February requested detailed information about their delivery of ongoing services, indicating a broader sweep of scrutiny across the industry. This letter emphasised several critical areas:

• Assessment of Ongoing Services: Firms must evaluate their ongoing services in light of the Consumer Duty and implement necessary changes.

• Client Review Data: Firms are required to provide data on the number of clients due for a review of the ongoing suitability of advice, the number of reviews conducted, and instances where fees were refunded due to unmet reviews.

• Historical Data: The FCA’s data request spans the last six to seven years, posing a significant challenge for firms with complex, merged, or acquired back-office systems.

Consumer Duty: Key Actions for Compliance

1. Reviewing Client Agreements
To meet FCA expectations, firms should first scrutinise their client agreements to ensure that the services promised are indeed being delivered and are feasible to provide. This includes reviewing third-party agreements to confirm their viability and alignment with client services.

2. Ensuring Appropriate Costing
It is crucial to verify that services are appropriately costed, avoiding unjustifiable cross-subsidies. This ensures transparency and fairness in service delivery and pricing.

3. Data Preparedness
Firms must be prepared to furnish detailed data similar to what larger firms have been asked for. This involves maintaining comprehensive and accurate records of ongoing service deliveries and client interactions.

4. Calculating Client Recompense
In instances where reviews were not delivered, firms should establish clear processes for client recompense. Expert compliance input is essential to ensure these processes can withstand regulatory scrutiny.

5. Preparing for Acquisition
For firms considering a sale, it is imperative to ensure that data on ongoing review services is robust and complete. This enhances the firm’s appeal and compliance standing during acquisition evaluations.

Consumer Duty: Preparing for the Future

The FCA’s increasingly proactive stance signals that firms cannot afford complacency. The July 2023 Consumer Duty implementation date serves as a benchmark for ongoing compliance efforts. Firms must ensure they have thoroughly assessed target markets and conducted fair value assessments.

Consumer Duty: Building a Robust Compliance Framework

To remain compliant and ahead of FCA expectations, firms should build a robust compliance framework that encompasses:

• Continuous Monitoring: Regularly monitor and assess service delivery processes to ensure they align with regulatory requirements.
• Staff Training: Provide ongoing training to staff on compliance obligations and best practices.
• Technology Integration: Leverage technology to streamline data collection, reporting, and analysis processes.
• Stakeholder Engagement: Engage with stakeholders, including third-party service providers, to ensure cohesive and compliant service delivery.

Consumer Duty: Conclusion

In conclusion, the FCA’s intensified focus on ongoing services necessitates a thorough and proactive approach from all regulated firms. By reviewing client agreements, ensuring appropriate costing, preparing detailed data, calculating client recompense, and preparing for acquisitions, firms can stay ahead of regulatory expectations. Building a robust compliance framework will not only ensure adherence to the Consumer Duty but also enhance the firm’s reputation and operational efficiency.

As we navigate these regulatory landscapes, it is essential to heed the wisdom of the old adage: “You don’t get a second chance to make a good first impression.” By prioritising compliance and transparency, firms can secure their place in an increasingly regulated market.