The relationship between Consumer Duty and SM&CR


A key priority of firms throughout the early stages of 2023 will be the implementation of Consumer Duty. Within their implementation process, firms will also need to consider the relationship between the new regime and how this can be supported by the Senior Management and Certification Regime (‘SMCR’).

From the FCA’s perspective they will require both the Duty and SMCR to work simultaneously to ensure that senior managers make sure their firms deliver against the new regulatory package. This responsibility of the firm’s compliance with the Duty’s requirements will be expected on an ongoing basis. Senior managers are expected to create higher standards whilst performing their duties, including:

  • Acting in good faith towards retail customers
  • Avoiding foreseeable harm to retail customers
  • Enabling and supporting retail customers to pursue their financial objectives

Senior managers (‘SMs’) will need to review the SMCR framework for changes in order to ensure that responsibility for the Consumer Duty is appropriately embedded within all roles and responsibilities- this will include reviewing Job descriptions, Statement of Responsibilities and the Management Responsibilities Map. Furthermore, SMs will need to guarantee that individuals applying to be approved persons are familiar with the Consumer Duty and their individual responsibility  for the Duty within the remit of their role- it has been suggested that their understanding of the Duty will be considered in the approval  process. Finally, SMs will need to make certain that staff are aware of the new Individual Conduct Rule 6 which requires staff to “act to deliver good outcomes for retail customers” and how it applies to their role. The FCA has explained that this rule will apply to the extent it is reasonable and proportionate; the more senior a person and the more relevant their role is to the Consumer Duty, the more the FCA will expect from them in terms of delivering outcomes.

Some reasonable steps to meet the FCA’s Consumer Duty requirements are as follows:

  1. Reviewing products and services
  2. Pricing
  3. Communications
  4. Customer Service/Support
  5. Consistency of approach
  6. Management Information (MI)
  7. Responsibility
  8. Training
  9. Taking action where customers are not receiving good outcomes

Making changes to ensure firms can evidence good customer outcomes may take some time. Consumer Duty is an opportunity for firms and its senior management to assess whether its products and services are delivering good customer outcomes and consider how they can enhance customer value.

To conclude, the expectancy of senior managers from the FCA will allow for easing of the implementation of the Consumer Duty. Following simple procedures within the SMCR will allow for greater custumer outcomes. This emphasises why it is important for senior management and their firms to consider the importance of SMCR in the Consumer Duty.

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