Demonstrating fair value on products and services is “the most challenging” aspect of the Consumer Duty’s four outcomes say 64% of financial services firms, according to Bovill.
The consulting firm’s poll adds that 44% of firms are still unsure how long it will take to put the new regulation’s key outcomes in place — which cover products and services, fair value, consumer understanding and consumer support.
This is despite the fact that product manufacturers must have completed their reviews by the end of April, before the guidance comes into force on 31 July.
The poll comes after the Financial Conduct Authority, the watchdog that drew up and will police the guidance, said in May that in early reviews it found that some firms were using “a single generalised template”, for fair value across a range of products. It adds that more work is needed in this area.
The regulator pointed out that some “firms planned to rely, at least partly, on high-level or unevidenced arguments, that their business models, or ethos, are inherently fair value.
“This could be, for example, due to their perception of how competitive or valuable their product or service offering is.”
Bovill partner Mark Spiers says: “The level of change needed to implement the Consumer Duty will vary from firm to firm, however, it is a very wide-ranging piece of regulation and many still have a lot of work to do before the deadline.
“This is a large piece of work and the greatest challenge for many firms is the uplift required, and the substantial investments that they are having to make in their capabilities to ensure they are compliant.”
Spiers adds: “Firms will need to keep their fair value assessments under continual review. Fair value is a moving target, and firms must continue to deliver it when circumstances change.
“Distributors need to think carefully about what data and information they need from manufacturers so that they can be sure of consistently good outcomes over the product, service and client lifecycle.”
The FCA issued its 68-page Consumer Duty guidance last July, saying it wanted to end “rip-off charges” and make it easier for customers to switch products.
The watchdog also wants firms to more clearly explain their products “rather than burying key information in lengthy terms and conditions”, and offer more support to vulnerable customers, such as pensioners or those under financial stress, which it adds is vital in the current cost-of-living crisis.
