Call of Duty: How putting customers front and centre will help industry innovate

Speech by Sheldon Mills, Executive Director, Consumers and Competition, delivered at the 'Countdown to Implementation of the Consumer Duty' event, hosted by Deloitte LLP.

Speaker: Sheldon Mills, Executive Director, Consumers and Competition
Event: Countdown to Implementation of the Consumer Duty
Delivered: 22 February 2023
Note: This is the speech as drafted and may differ from the delivered version


  • Firms will innovate through the Consumer Duty, which puts customers at the heart of any planning for financial services and products.
  • The FCA is thankful to the many firms that are continuing to make substantial efforts to embed the policy across their organisations.
  • Focusing on the areas that will have the greatest impact on consumer outcomes should be every firm’s priority ahead of 31 July.

The frog in the room  

How many of you here have heard the expression: 'Just eat the frog?'

For those who haven’t, it is about tackling the task first that you most want to avoid.

It originates from the American writer Mark Twain who said: 'Eat a live frog first thing in the morning and nothing worse will happen to you the rest of the day.'

The concept has been hijacked in modern times by management gurus who use it to describe how we should all prioritise the most difficult but important tasks. Especially those tasks that have the most impact.

I have had to learn about prioritisation the hard way. When it came to my first-year law exams, I became a bit compulsive about sorting all my printed material into the right colour-coded binders and delving into obscure case law that had nothing to do with my looming exams.

I also became very good at enjoying the view of the Thames from a certain bar on the Strand close to university.

You can imagine how well I did in my first round of exams following this strategy.

In my defence, I was pretty overwhelmed, coming from a council estate in Cardiff to a redbrick uni in London. I was actually quite scared of succeeding, in retrospect – and felt out of place.

In my second year, a mature student and a lecturer helped me find my feet in that alien world. I discovered that iterative steps towards learning, rather than piles of books stacked up unopened in the library, really helped.

I realised that if I tackled the parts I found the hardest or dullest first – and no it was not financial services regulation – the rest felt far more effortless. 

And today I would like to thank those of you who have taken the time to tackle a task that at first may have seemed overwhelming: preparing for the Consumer Duty.

Many of you have eaten that frog. Or at least devoured a leg.

We recognise that the Consumer Duty is significant, and for some requires a significant of amount of implementation to get right.

Many of you have made excellent progress, with 5 months to go for the implementation date. You are on course for meeting the 31 July deadline and while you are ironing out the final details, the big-ticket items have already been sorted.

We have listened to your feedback and have already extended the implementation deadline by 3 months, from April to July, to ensure we get this right.

We listened to firms' concerns, as obviously we want them to embed the Duty properly, and also phased the Duty in 2-stages over 2 years, with the deadline for open products in July 2023 and closed in July 2024.

A small number of firms may have seen the task as too big and adopted an avoidance tactic in the hope that it will all go away.

On behalf of your industry peers who have made the effort, we can confirm that the Consumer Duty will not go away. Their hard work has not been wasted. And you still have time to deliver. But you must act now. The deadline of 31 July will not be moved.

And we are here to help.

It might be useful for me to go over why the FCA embarked on the Consumer Duty in the first place.

Innovation, innovation, innovation

We were given the mandate to introduce the Duty through Parliament when the Financial Services Act 2021 came into force.

The Duty was designed to set and test higher standards and to reduce and prevent serious harm – which underpins our mission at the FCA and encapsulates our 3 year strategy.

Our work on the Consumer Duty predates the cost-of-living squeeze but the current economic climate highlights the need for those high standards and protections.

For what this looks like in practice, we can look at the plight of homeowners who are struggling with rising mortgage costs. Or to savers who often wait longer for the corresponding rise in their interest rates. We would remind firms that the Duty needs to deliver good outcomes for customers in financial difficulty and that retail customers need to be offered fair value. 

And of course, hard economic times hit those at the bottom of the financial ladder the hardest so the Duty does carry responsibility to look out for customers in vulnerable circumstances.

We also understand why there has been initial resistance from some quarters in industry.

And perhaps one of the reasons for that reluctance is this: We at the FCA have not been great at explaining what is in it for firms and UK Plc.

An industry leader recently admitted to me that although on the face of it, the Duty was a pain as it required work and resources, her directors were reporting that actually, it was proving to be a useful exercise.

They were uncovering customers they had not engaged with for some time. They were hammering out plans for new products and services ahead of schedule. They started looking at potential problems far earlier – and importantly, identifying new opportunities earlier too.

In all, it forced them to think differently. And what sparks innovation if not thinking differently?

The benefits to industry and organisations are that the exercise itself will refine systems and ideas.

Thinking differently and exposing yourself to meaningful change is at the heart of innovation.

The Consumer Duty is an outcomes-based approach. Data and outcomes monitoring is key, giving firms the impetus to target their customers more accurately through new technologies and systems.

The Consumer Duty is a customer-centric regulation. When you are engaging customers in a way that showcases how your product proposition is beneficial to them, it will have an impact on stakeholders and potentially on society at large.

You are incrementally, or even radically, improving your offering to the market.

That constant striving for excellence is at the heart of innovation and will drive the growth of our financial services industry. It will also drive effective competition for customers.

You will know by now that most of the effort will be in the preparation. But hard work at the start should mean less hard work rectifying avoidable mistakes down the line.

Being more upfront about what customers can expect from you should mean fewer complaints as we get it right from the start and fewer reactive rules down the line.

Whisper it, but it should mean lower costs down the line.

It will boost competition, as firms strive to offer the best in competing for clients.

But it should also provide an opportunity to inspire customer loyalty.

Ultimately, it will also increase trust in financial services, levelling up standards so that those who are striving hard are not taken down by industry stragglers.

Breaking it down into baby steps

By now I hope you are coming around to the realisation that the Consumer Duty is not really such a big frog after all. Perhaps it is more of a tadpole.

But for the benefit of the sceptics, we should spell out practical steps for eating that frog.

A quick reminder that the Consumer Duty deadline for open products and services is 31 July this year.

And for closed products and services, it is 31 July 2024. 

So what can you do between now and the next 5 months?

You should share information with your commercial partners and make sure they are on board. This will include your distribution network and wholesalers as well as retailers and any third parties.

You should focus on the areas that will have the biggest impact on outcomes for customers. Ask yourself the obvious question: is your product or service designed to deliver good outcomes for consumers?

You can make sure you have narrowed your target market and that they can understand your communications.

And now that spring is in the air, have you done your spring cleaning of any sludge practices that are lingering? Are there any cobwebs of bad practice that need clearing? Any punitive exit fees or unfair charges that need eradicating?

We should also look at the Pareto Principle, otherwise known as the 80/20 rule. This states that for many outcomes, some 80% of the consequences come from 20% of the causes.

Recently we took a deep dive into the plans from around 60 of the largest firms who have fixed supervisory teams and who operate mainly in retail financial services markets.

These are the firms with the greatest potential impact on consumers and markets.

Here is what we found:

We have seen so many good examples of firms who have taken to the spirit of the Consumer Duty.

We have also seen some firms who are struggling. 

Some firms appeared to have sidestepped swallowing the frog but were hopping around the edge of the lilypond. They were prioritising work that was not the most important.

Some initial efforts to address the Duty appeared superficial while others were over-confident in their existing systems.

In one example, there was no evidence of engagement with the firm’s Chair or other non-executive directors, and the board only asked one question before approving the plan. In another example, board minutes showed that the plan was approved without discussion.

Sincere congratulations if your firm is so far ahead that you pre-empted the Consumer Duty months in advance and have embedded cast-iron plans that are fail-safe!

But we do have a duty to scrutinise these plans so it is best to double check that these do in fact meet the substantive requirements as set out in our final rules and guidance.

Some firms had not focused on how they would work with other firms along the manufacturing and distribution chain.

For others, governance seemed patchy. We want someone at board or equivalent level to stand up and take ownership for championing the Duty. We don’t want the champion role to be shared across the entire board as this simply dilutes it. Some firms had no details of how they would embed good outcomes for consumers. Others did not present clear plans for delivering staff training, changing the culture or reviewing rewards. There is still time to do so.

I hope by now many of you are feeling relieved that I have not described your firm’s scenario above.

And actually, those who know me know I am an optimist. And many of you have given me reasons to be hopeful.

On track to delivering the Duty

Now some sceptics have questioned whether the Consumer Duty is really deliverable.

The answer, according to the evidence that many of you have presented us with, is yes.

Many firms have presented us with robust plans for implementing the Duty, with clear executive accountability for delivery and board oversight.  

We saw plenty of examples of firms who had mapped out their plans into workstreams with key milestones.

Many had subjected their plans to scrutiny and challenge by the board, executives and audit and risk teams. In one example, a firm is delivering one-to-one deep dive sessions with board members on plan deliverables.

Most firms have appointed a Consumer Duty board champion at board level to ensure that the Duty is discussed in a meaningful way.

We identified an example where a firm with a large group structure has appointed 2 champions to reflect the diversity of its different regulated entities. 

Many firms have detailed, clear arrangements for ongoing scrutiny of their organisation’s implementation work. 

We also saw evidence of firms involving risk and compliance and internal audit teams in a timely way.

Some firms have established a central coordinating forum to drive consistency in interpreting the Duty across different business functions.

At its heart, the Consumer Duty will mean a shift in culture and many firms can demonstrate how it will be embedded across all aspects of a company’s culture. This runs from aligning an organisation’s purpose to good outcomes for consumers to delivering training for all staff on the Duty.

Others are reviewing their rewards and incentives to take the Duty into account.

Now we know this aspect will be easier for larger or more profitable firms than others but we have seen some firms invest in outside experts and in technology to bolster their plans for implementing the Consumer Duty.

This all paints to great progress by some, and more work to do for others.

What next?

So what are the next steps towards the Duty and what will it look like by the time of the deadline, 31 July?

We are in the process of sending out industry-specific letters which build on the guidance firms already have, and help firms understand our priorities for embedding the Duty in their business area.

I just want to remind firms that we are here to help you make this a success.

We recognise this has taken significant effort and we are thankful to you for that.

We’ve made a wide range of resources available on our website, including our Finalised Guidance which I’d encourage you to read, podcasts and on-demand videos of our sector specific webinars.

We’ll continue to add to these resources and run further events, including Live & Local events for small and medium-sized firms in the retail investment and mortgage sectors, to support you in your journey.

We will be surveying around 600 smaller firms next to check how prepared they feel with their implementation plans.

Separately, some sectors are conducting multi-firm work on implementation plans.

After the deadline, we will take a pragmatic and proportionate approach and will help those who are taking their final steps towards meeting the standards of the Duty.

Of course, we have a duty to take action, particularly against serious breaches, and we always go after the worst offenders who are at risk of having the biggest impact on our financial services industry. I am sure that will be something supported by the many who have expended the time and resources to meet the Duty.

So what does a pragmatic and proportionate approach mean? Well we will always tackle the biggest risk to consumer harm first.

But I think it is worth repeating that the Duty is not retrospective, so it will not mean organisations will be taken to the Financial Ombudsman Service for past actions or omissions so long as they are put right by July for products or services that are still on offer. For products and services that have been withdrawn to new customers, you have until July 2024.

Over the next 5 months, it will be essential for firms to work together across the manufacturing and distribution chain to deliver good outcomes. This includes where you may have outsourced the delivery of services to other parties.

At every stage of the regulatory life cycle, we will ask you to demonstrate your business models, actions you have taken and how your culture is refocusing on good customer outcomes. We will be looking to see that consumers receive communications they can understand, are offered products and services that meet their needs and offer fair value, and they get the customer support they need.

One milestone to look out for is the end of April, which is when manufacturers will need to complete all reviews necessary to meet the 4 outcome rules and share information with distributors to help them meet their obligations.

And those 4 outcomes relate to:

  • the governance of products and
  • price and value
  • consumer understanding, and
  • consumer support

Spawn of a new era for business and consumers

A lot can be achieved in the next 5 months. Thank you to those who have expended energy and resources to do everything in your power to meet this deadline. We know some have more work to do.

But know this: Once you have eaten the frog, it will be worth it. You will have a renewed, laser-focus on your target customers. Good outcomes for those customers will underpin your whole design process. The Duty will radically change company culture for some of you and will validate the customer-centric focus you already have for others.

You will be able to map the customer journey, spot possible problems in advance and communicate with clarity to make sure you and your customers are getting the best out of each other.

You will – in the long run – possibly save money and almost certainly save stress.

You will improve your processes, find new ways of doing things and hopefully this frog will spawn new opportunities. In other words, you will innovate.

Yes it requires upfront commitment to your business, to your organisation and above all to your customers.

But embrace that frog. You never know, it may just turn into a prince.

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