SPRING INTO ACTION: TIME TO FOCUS ON BOARD REPORT

Waking to frosty mornings make the balmy days of summer seem light years away. Well, there’s a pretty significant deadline looming in July and even though we’re still the wrong side of Easter, it will be here before you know it!

The first Consumer Duty board report is due in less than four months’ time. If you’re not already thinking about how to tackle the assessment, we would encourage you to at least take a look at the data you will use as supporting evidence. You need to check if it addresses the key risk areas that could result in poor outcomes for customers.

A milestone moment

This inaugural board report is the first significant milestone since the implementation of Consumer Duty and it should be seen as an opportunity to evidence the steps you are taking to drive good results.

The FCA has made it clear it will request board reports, along with the data that sits behind them, in its bid to assess how firms are embracing the new regulations.

The report’s purpose is to review and approve the work you are doing to meet your obligations. It will need to be completed annually and should consider the following:

• Details of the firm’s monitoring: This should form the basis of the assessment and confirm if you are delivering outcomes in line with the duty. It needs to identify poor outcomes and if any group of customers is faring worse than others, for example, clients with vulnerable characteristics. If the outcomes identified are not as expected or at odds with the regulations, you will need to complete a root cause analysis.
• Risks and issues: Your report should detail any actions you have taken throughout the year to address risks and issues.
• Future plans: The report should also be forward looking. It must detail your business plans for the forthcoming year and demonstrate how they align with the duty.

Monitoring outcomes

It is good practise to regularly monitor the risks you face as a firm and the outcomes you are achieving post-Consumer Duty implementation to help you develop proactive strategies to tackle issues. The FCA has found that many SME firms take a ‘wait and see’ approach before intervening, which is not adequate oversight.

For the most part, we expect existing management information can be used to complete the board report, as this will likely cover a lot of the risk areas within your firm. For example, training and competence, suitability of advice and sales. However, there could be gaps that need to be reviewed, which require new metrics and data to show you understand your customers and that appropriate action is being taken when problems are identified.

The regulator expects you to have reviewed and where appropriate, improved your data and monitoring strategies for Consumer Duty. If you didn’t do this as part of your implementation plan, we recommend incorporating it into your preparation for the production of the board report.

We are advising firms to document a data strategy that shows you have identified the risks that may prevent good outcomes and how you will use data to detect issues and the triggers or thresholds that would prompt you to escalate them.

Embrace the information available

In its quest to be more proactive and data driven, the FCA has written to large financial advisory firms asking for information about their delivery of ongoing services. It is particularly keen to find out more about clients who continue to be charged after advice has been given.

This information is being collected to assess what additional regulatory work may be necessary in this area. We expect an update to be forthcoming after the responses have been reviewed.

You may not be directly affected by this survey, but the key learnings will be applicable to smaller advice firms in the sector. You can use surveys like this one and the subsequent results to assess if the data you currently collect is sufficient to provide the level of detail the regulator expects.

Some of the key questions to come out of recent FCA surveys/information requests include:

• How many vulnerable customers do you have?
• How many clients are due an ongoing suitability of advice review as part of the service you provide, how many received that review and how many paid for ongoing advice but didn’t receive a refund if the review didn’t happen?
• Have all relevant clients received an ex-post cost and charges disclosure within the past 12 months?
• What percentage of files were reviewed by your risk and compliance experts in the last 12 months?

Regardless of the size of your business and whether you have been contacted directly by the FCA to provide this information, we believe the data you are beginning to collate for the board report should address these questions. To assist our clients with this, we have created a board report template and data strategy that are included within our Consumer Duty Toolkit.

Before tackling the production of your board report, we also recommend reviewing the FCA’s most recent publication that gives examples for SME firms of good and poor practise during the Consumer Duty implementation process.

If you want to know more about preparing your first Consumer Duty board report, don’t hesitate to contact us on (0161) 521 8641 or email: info@b-compliant.co.uk