What is FCA’s Consumer Duty?

With its proposed Consumer Duty rule, The Financial Conduct Authority (FCA) is signaling a major shift in expectations for financial services firms under its watch, as it steps up efforts to shield everyday consumers. Consumer Duty will set higher standards for how financial services firms (broker-dealers) conduct business with consumers.

Consumer Duty will impose a greater standards of consumer care at every stage of the customer relationship, while focusing on outcomes and stopping harm before it happens. In short, the Rule affirms the duty of UK financial services firms to put consumers’ interests first and makes it clear that senior managers will be held accountable when this doesn’t happen. Consumer Duty will be the biggest overhaul of UK regulations governing broker/dealers since the Retail Distribution Review of 2013.

When does it take effect?

The regulations is set to take effect on April 30, 2023

Who will be impacted by the regulation?

Financial services firms (broker-dealers) in the UK

When does Consumer Duty apply?

The new standards of care under Consumer Duty apply to broker-dealers working in financial services firms, and more specifically to the regulated advice and financial recommendations broker-dealers make to consumers.

What will the regulation require?

Firms will be required to act in a manner that delivers good outcomes. This means:

  1. Acting in good faith
  2. Avoiding foreseeable harm to consumers
  3. Enabling and supporting retail customers in pursuit of their financial objectives
  4. Delivering positive outcomes across all 4 pillars: product and services, price and value, consumer understanding, and consumer support
How can we help your firm comply with Consumer Duty?

Consumer Duty will require firms to act in good faith, avoid foreseeable harm to customers, support customers in pursuit of their financial objectives, and deliver positive outcomes across multiple consumer touch-points. NICE Actimize’s SURVEIL-X will help firms comply with Consumer Duty in the following ways:

  • SURVEIL-X captures, documents and monitors all broker-dealer/client interactions (voice, electronic, meeting notes in CRM, etc.), accurately identifying recommendations, and then leveraging analytics (such as our best product alternative model) to accurately detect and alert when investment recommendations deviate from customer risk profiles.
  • Similarly, these analytics can help firms better support customers in pursuit of their financial objectives by highlighting and displaying products that would have been more suitable for the broker-dealer to recommend, given the customer’s risk profile.
  • SURVEIL-X also automates monitoring of broker-dealer/client interactions to ensure that proper disclosures were given, prior to any recommendations, enabling customers to make informed decisions.
  • Leveraging out-of-the-box (OOTB) analytics, SURVEIL-X can also accurately detect a broad range of misconduct issues, and inappropriate marketing and sales practices, such aggressive selling, commission loading, churning, and more.
  • With SURVEIL-X Studio’s DIY analytics, firms can easily adapt OOTB analytics or create new rules to gain insight into (and alert on) specific concerns, for example, identifying when clients are acting erratically, or flagging inappropriate broker-dealer recommendations involving specific (e.g. elderly) populations. Firms can also build additional checks into the system to identify broker-dealers with excessive alerts and put them under heightened supervision. DIY analytics eliminates the need for expensive and time-consuming custom development and programming.