Consumer Duty - increasing incomes by improving outcomes

Alignment to FCA expectations

• Finalise implementation. There will be an expectation from the FCA (sooner rather than later) that firms have fully implemented all residual activity from their implementation plans — and can evidence this. Notwithstanding the iterative nature of the Duty, across open and closed products, firms should be seeking to determine which activities are achieving full compliance versus those which are tactical fixes and will undergo further enhancements. This will allow firms to reach a definitive and final position on implementation. In KPMG's professional experience, on open products, these are more likely to be IT (data and MI) upgrades, culture enhancements and/or remediation activities. For closed products, there is typically a tail of customer communications and product uplift activities underway (although there may be some residual work for open products too).
  
  
• Respond to FCA findings. The FCA has been proactive in sharing its initial findings on implementation of the Duty with a range of good and poor practice findings on different topics — and we know that more are coming. Firms will need to use these to benchmark and recalibrate their approach to meeting the various requirements. Given the sector-agnostic nature of the Duty, this should include consideration of findings from other sectors. As such, we expect approaches to evolve, especially in the short term, as firms address FCA findings.
  
  
• Anticipate future FCA supervision. Unlike any other regulatory change, the FCA has been proactive in terms of pre-announcing its areas of interest and focus. Sheldon Mills has also announced that FCA will publish a Grid detailing and timetabling further FCA reviews on components of the Duty. Therefore, firms should re-acquaint themselves with relevant Dear CEO and portfolio letters to anticipate specific further challenge on key topics. From this, firms should develop the evidence required (addressing any shortfalls as they find them) to respond appropriately to FCA information or evidence requests. This will help firms get on the front foot and pre-emptively ensure they are maximising alignment to FCA expectations. 

Fully embed the Duty

• Deploy into the target operating model (TOM). This will require firms to ensure their target operating model supports the successful transition of the Consumer Duty from a project or programme basis to a state where the TOM is updated to ensure that it is embedded across all customer journeys, product lifecycles and relevant departments. Only by effectively embedding it, will alignment to the Duty be long term, dynamic and sustainable.
  
  
• Embrace data, technology and tooling. Given the pace at which firms have implemented the Duty, firms are now turning their attention to embracing and deploying technology and tooling to move from a tactical approach to a more strategic, elegant, efficient and effective one. For example, this could include implementing a `voice of the customer' platform to improve insights received from clients. Linked to the above, it will also make adherence to the Duty more enduring.
   
• Evidence cultural alignment. KPMG professionals are also seeing significant activity to benchmark and evidence cultural alignment, as well as any further enhancements or improvements required or being progressed to ensure that delivering good customer outcomes is part of the firm's embedded culture and purpose. This includes engaging with both employees and customers to genuinely evidence alignment of the firm's culture and purpose to the Duty. 

Explore commercial upsides

• Strategy and business model opportunities. Having embedded the duty, there is an opportunity for firms to re-assess their strategy and business model to drive towards a culture of customer centricity. This can be achieved by redesigning the target-state customer journey using insights from the experience of implementing the Duty. This has the potential to increase revenue, retention, customer satisfaction and attract new customers, whilst reducing costs.
  
  
• Proposition innovation. The richer data set and more forensic analysis of product features (including their price and fair value), and how they perform via outcomes testing will identify opportunities. These include product rationalisation as well as new product innovation, identifying previously hidden opportunities and customer needs. Redesigned, insight led customer journeys will help firms reimagine existing products and services or create new ones based upon a deeper understanding of customer outcomes. 
  
  
• Operating cost and control reduction. Finally, when fully embedded there is a significant opportunity for firms to reduce costs, either by reducing operating costs or reducing controls to reflect the more customer centric nature of the firm. Consequently, the firm is more likely to automatically align to the Duty and therefore require fewer detective controls than previously. This allows control functions to be repurposed into more proactive and supportive roles — rather than reactive remediation or identification of detriment activity. A deeper understanding of target-state customer journeys provides opportunities to remove friction and align products to channel preferences, reducing costs to serve.

Conclusion

KPMG in the UK's view is that Consumer Duty success can only really be achieved once the three legs have been fully considered and addressed. It would represent a significant missed opportunity if firms focused solely on aligning to FCA expectations and/or embedding the Duty without recognising the opportunities that it presents.

Critically, a successful implementation of the Duty cannot be achieved unless you have all three present. The below table illustrates different approaches to implementing the Duty, and the associated regulatory challenges and opportunities. While some categories illustrate intentional non-compliance, there are others where a lack strategic thinking or misunderstanding can result in issues. Firms can reflect on the categories to understand where they fall.

How KPMG in the UK can help

We have extensive insights and further thinking on how the Duty may evolve that we'd be delighted to share on the above core activities. More generally, KPMG in the UK continues to support firms with (i) price and fair value peer analysis to help Duty alignment, (ii) designing and deploying technology and tooling solutions and target operating models to accelerate embedding of the Duty, and (iii) increasingly developing strategies and solutions to take advantage of the commercial opportunities that the Duty offers. These cover areas such as customer journey transformation, `voice of the customer' technology, and integrated and cohesive customer support approaches. If you would like to hear from experienced KPMG professionals or if you require specific support on your Consumer Duty programme, embedding activities, or commercial considerations, please do not hesitate to get in touch. All our other articles on Consumer Duty are accessible on our Consumer Duty hub.