Educating Tandem (continued)

They set out a range of requirements, including the need for relevant businesses to:

• Ensure that the design of the product or service meets the needs, characteristics, and objectives of customers in the identified target market.

• Ensure that the intended distribution strategy for the product or service is appropriate for the target market.

• Carry out regular reviews to ensure that the product or service continues to meet the needs, characteristics, and objectives of the target market.

Price & Value

This outcome seeks to ensure that the price a customer pays for a product or service is reasonable when compared with the overall benefits that the product or service provides.

However, the FCA also highlight that fair value is more than just about price and that the Consumer Duty seeks to tackle factors that can result in poor value or unfairness such as unsuitable product features that can lead to foreseeable harm or frustrate a customer's use of the product, poor communications, and poor customer support.

To assess if a product or service provides value, firms must consider at least the following:

• The nature of the product or service, including the benefits that will be provided or may reasonably be expected and their qualities.

• Any limitations that are part of the product or service.

• The expected total price customers will pay, including all applicable fees and charges over the lifetime of the relationship between customers and businesses.

Consumer Understanding

The FCA is seeking to ensure that businesses’ communicate support and enable consumers to make informed decisions about financial products and services, with a particular focus on consumers being given the information they need, at the right time, and presented in a way they can understand.

The consumer understanding outcome rules retain the obligation under Principle 7 for businesses to communicate information in a way which is clear, fair, and not misleading. They also build on, and go further than, Principle 7 by requiring businesses to:

• Support their customers’ understanding, by ensuring that their communications meet the information needs of customers, are likely to be understood by customers intended to receive the communication, and equip them to make decisions that are effective, timely and properly informed.

• Tailor communications considering the characteristics of the customers intended to receive the communication – including any characteristics of vulnerability, the complexity of products, the communication channel used, and the role of the business.

• When interacting directly with a customer on a one-on-one basis, where appropriate, tailor communications to meet the information needs of the customer, and ask them if they understand the information and if they have any further questions.

• Test, monitor and adapt communications to support understanding and good outcomes for customers.

Consumer Support

The FCA’s focus on this outcome is driven by a desire for businesses to provide a level of support that meets consumers’ needs throughout their relationship, with a particular expectation that customer service should enable consumers to realise the benefits of the products and services they buy, and ensure they are supported when they want to pursue their financial objectives.

The FCA highlight that a product or service that a customer cannot properly use and enjoy is unlikely to offer fair value.

There is a close relationship between the rules under the consumer support outcome, and the consumer understanding outcome. Under the consumer understanding outcome, businesses should communicate with customers in a way that equips them to make effective, timely and properly informed decisions. Under the consumer support outcome businesses should enable customers to act on these decisions without facing unreasonable barriers.

Businesses should keep their obligations under both outcomes at the front of mind in all their interactions with their customers.

Governance, Accountability and Key Milestones

The Duty requires businesses to ensure that acting to deliver good outcomes is reflected in their strategies, governance, leadership, and people policies.

The FCA expect firms to have a champion at board level who, along with the Chair and the CEO, ensures that the Duty is being discussed regularly and raised in all relevant discussions.

Board Report

A business’ Board should review and approve an assessment of whether the business is delivering good outcomes for its customers which are consistent with the Duty, at least annually. The report should include:

• The results of the monitoring that the business has undertaken to assess whether products and services are delivering expected outcomes in line with the Duty, any evidence of poor outcomes, and an evaluation of the impact and the root cause

• An overview of the actions taken to address any risks or issues

• How the business’ future business strategy is consistent with acting to deliver good outcomes under the Duty.

Key Milestones

• October 2022 – Board to agree implementation plans and oversee delivery of the Consumer Duty from this date through to implementation

• April 2023 - manufacturers to share key information with distributors, three months ahead of the implementation deadline

• 31 July 2023 - new deadline to implement the new rules for new and existing products or services that are open to sale or renewal

• 31 July 2023 - new deadline to implement the new rules for closed book products or services