Sheldon Mills, FCA Executive Director, Consumers and Competition, has given a speech looking ahead to the deadline for ‘closed products’. Mills addresses some of the challenges firms are facing and sets out that the FCA expects firms to have a clear roadmap to comply by the 31st July 2024 deadline.
The FCA has also published its findings of good and bad practice in a report following a review of firms’ practices. Many firms have already made great progress on the Duty, for example, firms removing jargon and moving clients to less bespoke and cheaper options where that is a better fit.
Key points from the FCA’s review of firms include:
Price and value
- Many fair value assessments are not relying on solid data and other credible evidence to justify the products’ value to retail customers. It is important that firms’ data demonstrates the four outcomes of the Consumer Duty.
- Some firms have relied solely on benchmarking against the market when considering their pricing. The equivalent of a Google Shopping search does not prove that a customer is getting a fair deal.
- The FCA wants to see firms considering all the aspects of fair value at the product level and considering the impact on different consumers.
- Board reports will come under greater scrutiny as the FCA will be looking at the evidence firms are taking to drive good outcomes.
Open and closed products
- The FCA understands that there may be gaps in the data firms hold from legacy systems.
- Firms must assess, and be able to demonstrate, that their closed products provide fair value to and good outcomes for customers. If a firm could have reasonably known that its pricing assumptions were significantly wrong at the time a product was sold, then the FCA will consider if the firm complied with rules that were in place at the time.
- Firms will need to test, monitor, and adapt their communications approach for driving the right outcomes for consumers.
- By now, firms should have a clear roadmap to comply with the Duty by the deadline for closed products which is 31st July 2024, having reflected on what lessons they learned in the run up to the first deadline.