Consumer Duty Board Report Guidance

|Date
|19th May 2024

Monitoring Activities & Evidence
  • What evidence do you have that you are meeting the four outcomes?
  • What metrics do you use to measure that your products are fit for purpose and providing fair value?
  • How can you evidence that you are supporting customers to make an informed decision, both verbally and in your written communications?
  • Where is your evidence that you are providing an appropriate level of support to meet the needs of your customers throughout the relationship with your firm?
  • How are you able to demonstrate that your culture is customer focussed and that you are ensuring vulnerable customers are receiving good outcomes, as good as other groups of customers?
 
Culture
  • The importance of the firms ‘customer first’ culture should not be underestimated and you should be able to evidence this culture within the Board Report.
  • How you deliver good outcomes should be considered/monitored continuously to ensure that you are driving improvement.
  • The Duty should be embedded throughout the organisation from the top down and the customer centric approach should be documented in your strategy, governance, leadership, people and policies.
  • To be able to effectively meet the duty, you must make sure that the customers’ best interest is Intertwined into every part of the business.

How are you:

  • Assessing
  • Testing
  • Understanding
  • Evidencing

That you are delivering good outcomes?

 

Fair Value
  • Fair value is an important part of the duty. How does your MI support that you are delivering fair value? 
  • The FCA is disappointed that firms are still not able to demonstrate they are delivering fair value to customers and will be taking action against any firms they identify as not doing so.
  • Fair value isn’t just about fees. Consider and document how your services and the support you offer your clients feeds into the value they receive.
 
Preparing The Board Report
  • The report doesn’t need to be submitted; it isn’t an attestation. However, the FCA has said that it will be asking some firms to share their report, so it should be prepared on the basis that it may be seen by the FCA.
  • Preparing the Report will involve input from all levels of the business so it’s important to have Clarity on who has ownership and accountability of the various monitoring activities and pulling the information together for the report.
  • When collating the board report, you should revisit your original implementation review/gap analysis. The report should provide information about the implementation process, your review process, areas that needed work and the plans to act in these areas.
  • The report should ‘do you’ and not be based on a standard template. Consider using a dashboard to present information about the implementation on ongoing progress. A RAG system is a good way to provide a visual on the firm’s progress and will help engagement with the Board.
  • It should be proportionate. The report shouldn’t be hundreds of pages long, or supplied with hundreds of pages of evidence but it needs to be comprehensive enough to cover all the necessary points.
  • You should provide a bottom-up summary of evidence gathered over the year since implementation with contribution from all levels of management within the business.
  • This should be seen not as an auditing exercise, but a testing of the mindset within the business to ensure a robust approach to the consumer duty

Questions to ask, things to include in the report:

  • Can you demonstrate you are making positive changes – show me?
  • Could you do more?
  • Call out things you’ve done well.
  • Changes that you’ve made that have improved customer outcomes.
  • What could you do better?
  • What do you want to change, or do differently?
  • These areas should be presented to the Board in such a way that they can respond and leverage improvement.
 
What should be in the Board Report?
The report should contain sufficient information to enable them to understand:
  • What outcomes the firm is delivering for its customers. 
  • Whether the firm is meeting the requirements of Principle 12
  • Whether the firm’s business strategy is consistent with Principle 12
 
  • There should be details about the monitoring activities. Owners, how it’s conducted, output from monitoring, issues identified and documented action plans.
  • The report should consider how future business plans should reflect the obligations of the duty and whether they allow for full and effective compliance and whether the documented business strategy needs to be changed or updated.
 

Vulnerable customers should be included in the report:

  • How you identify them. 
  • Whether staff are sufficiently trained to recognise and respond to vulnerability. 
  • How you document vulnerability on your system and how you monitor the outcomes you deliver to vulnerable customers, for example, that they receive the same outcomes as customers without vulnerable characteristics.
  • MI is key so the MI derived from monitoring activities should drive the report summary and conclusions to be drawn from monitoring activities. Don’t forget to include feedback from customer surveys and reviews.
  • Provide evidence to prove what you are doing to deliver good customer outcomes.
  • The Board must be able to ask themselves ‘Does this process actually work?’ so the information in the report must enable them to answer this question.
  • The Report should outline where your changes have been effective and where you have made assumptions, and where you have more work to do
  • Can the Board be satisfied from the monitoring output that vulnerable customers are being correctly identified and supported? Where is the evidence ?
  • If you’d done work in this area, what has been done and what changed as a result?
 

As we’ve already said, getting the Consumer Duty embedded into the business isn’t a ‘once and done’ job, it’s ongoing with continual improvement. So, don’t expect to have a ‘green’ Board Report first time around. The FCA won’t trust a ‘green’ report first time around anyway, they will expect to see some amber and red. However, they will also expect the report to highlight anything that needs remediation and will expect to see suitable metrics, context and commentary.

The contents of the Report should be supported by data, metrics, examples and case studies if available. Feedback/pushback from NEDs or the CDC should be included in the report to evidence that the Board are being challenged in their delivery of the Duty. Don’t forget to minute the Board Meeting and the review/signing off the report