10 KEY POINTS
The FCA’s sternly written Dear CEO letter about the pace of the product rule implementation is a guide to how they will act if the Customer Duty principle is not implemented with pace and rigour.
Here are 10 things to be thinking about:
Read the rules. and get the best industry guidance available from regulatory strategy consultants. Remember you are personally on the hook for this!
Make a start. There is a lot to do and governance arrangements need to be in place by the end of October
Appoint your Champion If you have a Board of Directors think hard about which NED to make Customer Duty Champion. Ask yourself, are any of your board right for this? If you don’t have a board, will you lead or delegate? To whom and why?
Get the Data. As with the pricing reforms, the FCA will be looking for evidence. Imagine you were on a panel justifying your company's actions to an audience of customers. How would you fare? Can you back up your words with hard evidence?
Start with the culture. Be honest with yourself and your Directors about whether your current primary driver is just the bottom line - if you don’t know the answer to this, your front-line staff will! Can you point to hard evidence that your decisions are truly based on giving fair value to customers?
Governance. What Customer committee arrangements do you have in place? Do you have meetings dedicated to the customer agenda? Are they populated with data or gut feel? Who attends? Do they have teeth? Eg can the customer committee reject a new profitable product proposal on the grounds that it’s not in the customer's best interest? Has that ever happened? Are you only using simple surveys and complaints data as the proxy for knowing your customers? Can you point to a time when you have made a decision to lower prices, refund money, or stop selling a product?
Look for the ominous signs such as potential customer harm issues that you are aware of but have not acted on. Review Minutes of meetings that would not face the scrutiny of the Daily Mail e.g ‘workarounds’ that are clearly designed to get around FCA rules. Unresolved staff issues that potentially lead to disengaged people. Incentive schemes that put income above fair customer outcomes
Barriers to Exit. Do you have barriers to customers exiting your business eg online customers having to call to cancel? Egregious cancellation fees and charges that don’t pass the value test.
Skills and Knowledge. Do you and your team have the skills and knowledge needed to operate in the current regulatory environment? If not do you know where to find them?
Embed Customer Duty into senior manager responsibilities. Remember this needs to be an organisation-wide culture change not lots of tasks thrown at the compliance and conduct teams.