On the 11th December 2024 the FCA issued a communication regarding Consumer Duty Board Reports. The report sets out the results of a targeted and thematic review that they carried out on the first annual Consumer Duty board reports from 180 firms. The FCA have provided examples of good practice and areas for improvement, which are not intended to be prescriptive in terms of what board reports must contain.
The FCA want smaller firms to feel confident in delivery of the Duty. The FCA found areas of good practice from firms of all sizes, including those with fewer than 10 employees. The FCA have stated that they expect all firms should be able to monitor customer outcomes, take actions and implement a business strategy that aligns with the Duty to ensure that those outcomes are good. The FCA have set up suggestions for how smaller firms might meet their requirements as follows:
Governance – Smaller firms may lack dedicated compliance audit functions. Instead, smaller firms may benefit from having a knowledgeable ‘critical friend’ to provide impartial feedback on their approach to the Duty.
Monitoring and Outcomes – Smaller firms may find they are more limited in the range of MI they can access. Where proportionate, they should look for opportunities to draw insights from external data sources, including the Financial Ombudsman Service as well as insight from relevant trade bodies.
Actions taken to comply with the Duty obligations – Given their limited resources, smaller firms may take few actions and have limited MI to measure effectiveness of those actions. Smaller firms may find external experts helpful in advising on effective actions. In some instances, however, their size and flexibility may allow smaller firms to provide more tailored support to individual customers.
Future business strategy – Smaller firms may encounter fewer customer with different specific needs. Extensive policies and structures dedicated to these customer segments may be unnecessary. We will still expect smaller firms to learn from transactions with different groups of customers to ensure they deliver good outcomes in the future.
We highly recommend that you read the link below in full and refer any questions to the NPA.
Consumer Duty Board Reports: good practice and areas for improvement | FCA