Time to start your consumer duty annual board report

31 July 2024 seemed a long way off in December 2023 – plenty of time. However, although the difference between 31 December 2023 and 1 January 2024 is only one day, suddenly all of the 2024 deadlines now look much closer.

Soon, we will be in the thick of the end of the financial year, and then it will be a matter of months to go until the Consumer Duty annual board report process needs to be completed. It is important to remember completed, here, means not just having drafted a report but (to quote Stevie Wonder) having the whole process “signed, sealed, delivered”. You must have:

  • Prepared the report;
  • Agreed on the actions to be taken in the report;
  • Delivered the report to the board; and
  • The board must have:
    • Reviewed, scrutinised and approved the report;
    • Agreed on the actions to be taken;
    • Confirmed it is satisfied the firm is Consumer Duty compliant;
    • Assessed whether the business strategy is Consumer Duty compliant; and
    • Agreed any amendments to that strategy.

Why should I take this seriously?

There are many reasons, but to put it quite simply: because the FCA is. The FCA is talking tough on enforcement and most of us are expecting the FCA to take action to demonstrate the impact of the Consumer Duty – no firm wants to be in the FCA’s sights as the firm to make an example of. The annual board assessment is one of the first opportunities for the FCA to get a feel for how well firms have implemented the Consumer Duty. In the FCA’s words: "This assessment will be part of the evidence we use to assess a firm's ongoing compliance with the Duty. You'll need to be able to provide it, and the management information that sits behind it, on request. As I said, the duty is not once and done. Firms' actions, assessments, testing and evidence need to be continuous" (Nisha Arora, Director of Cross Cutting Policy and Strategy at the FCA).

There are, of course, many other reasons. One positive reason is that it allows firms to assess and improve the products and services they provide, which should lead to more satisfied customers, less time (and cost) spent on complaints and, with the focus on outcomes, the ability to identify gaps and opportunities where customers have needs that firms can fulfil. As always, in the long-term, it will inevitably be cheaper to get it right now, rather than incur the time and cost of FCA supervisory or enforcement action. So, if that is the “why”, the big question is the “what”…

What should I start by doing?

  1. Create a project plan

It may seem basic, but as with any other project, the Consumer Duty needs a project plan. It’s no good having a plan to deliver the report to the board when key members are on holiday. Get the critical board meeting for approving the report in the diary and make sure everyone is aware of it. Then you can plan all of the steps to get there. Remember to leave time for the board to scrutinise, raise queries and disagree with the report!

  1. Use our Consumer Duty Continuous Improvement Cycle
  1. Get your implementation plan out of the drawer

Given the implementation plan should be a “living document”, hopefully you shouldn’t need to be dusting this off! Either way, this is a good time to update it and to use it for the board report. The report should be assessing the firm against its implementation plan, which should identify the monitoring the firm is conducting. The implementation plan can also be used to help structure the report. Remember to also review whether the monitoring you are carrying out is effective.

  1. Go back to basics

The heart of the assessment is Principle 12: delivering good outcomes for retail customers. The assessment is whether the firm has achieved this, whether there are risks to it achieving this and what actions it should take to rectify or improve this.

  1. If it’s not Written Down, it Didn’t Happen

The FCA will want to see evidence of monitoring, evidence of root cause analysis, evidence of actions agreed, evidence of the action being taken and crucially, here, evidence it is being taken seriously and is being scrutinised at board level. Remember to accurately record all of the hard work that goes into the board report.

How can we support you

We have prepared practice notes for Lexis Nexis UK on the Consumer Duty and have assisted numerous firms with planning, implementation, fair value assessments, ongoing queries and responding to FCA queries and requests for information relating to Consumer Duty compliance. We therefore know what the regulator is looking for and have insight into what firms are doing across the sector. We can help you prepare a compliant, robust and commercially useful board report and advise board members on what they should do when they receive the report for review.

If you have any queries on completing your first annual board report, get in touch with Adam Edwards, Daniel Meyer or Daniel Seely.

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The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.

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