Consumer Duty Board Report 2024: Lessons Learned

With the deadline fast approaching for firms to deliver their first ever Consumer Duty Board Report by 31^st July 2024, most firms will now have their sights on the next steps to take. It is widely publicised that the FCA will undertake some thematic testing of the Board Reports across all sectors, and firms should be prepared for any questions the regulator may have from its review.

Square 4 have supported a variety of firms across the Wealth and Retail Lending sectors with the implementation and post implementation activity of Consumer Duty. Over the past few months our focus has turned to supporting our clients (and trade association partners) develop their Consumer Duty Board Reports in light of the pressing 31^stJuly deadline. In addition to providing dedicated support to our clients, we have also developed a comprehensive Square 4 Consumer Duty Board Report Guide to support other firms across financial services.

Through working with firms and trade bodies, it is clear that there are some common areas which firms need to focus on to ensure that next year’s Board Report draws conclusions that are appropriately evidenced and robust. We have outlined below some of the common themes identified through our work:

There is a lack of an organisational framework across firms to generate the information required, and in some instances a lack of ownership for writing the report. Some reports have been delivered by the second line. The report should be owned and delivered by the first line.
The component parts, processes and frameworks implemented are not clearly joined up and support the firm draw clear conclusions.
Outcomes Monitoring Frameworks are not appropriately evidenced based. Conclusions that good outcomes are being delivered are based on qualitative statement and not appropriately backed up by data (this is also true for Price and Value assessments).
In some instances, firms have not defined what ‘good’ outcomes look like for their own specific customers. Therefore, assessment of customer outcomes becomes difficult to evidence. In some cases, firms are also not reporting on evidence of poor outcomes, including whether any group of customers is receiving worse outcomes compared to another group, along with any action taken.
A summary assessment of outcomes monitoring is usually provided by firms in the report, however, in some cases firms have not defined what management information or data points have been used to draw conclusions, or there is little to no underlying management information provided in the report to evidence outcomes.
Some firms have provided background to the processes, controls, governance and frameworks introduced, but have not provided evidence or information as to whether they are operating effectively to prevent harm.
There is limited provision in the report for any risks and issues identified, and where identified, there is a lack of action documented.
In some cases, firms had limited information regarding their strategy, and how this may have evolved in light of Consumer Duty.
Some firms had limited action plans documented for activities post July 2024. Clearly articulating what you will do / continue to do to embed Consumer Duty and ensure good customer outcomes are delivered is a critical element of the report.

Next Steps

Using our experience of both reviewing and writing Consumer Duty Board Reports for firms across the financial services spectrum, we have put together some points for consideration for your firm’s 2025 Board Report, and other areas of focus for August 2024 – July 2025.

Start planning early for the 2025 Board Report. Formulate a Board Report framework and assign ownership for tasks, including collation of necessary Management Information. Typically, in most firms, it is usual practice for monitoring results and the report to be owned by the first line, with independent oversight and contributions from the second and third lines of defence as necessary.
Start with the end in mind. Define what ‘good’ outcomes look like and ensure your Outcomes Monitoring Framework corresponds and can be assessed against the four Consumer Duty Outcomes, the Cross Cutting rules and ultimately support Principle 12.
After defining what ‘good’ outcomes look like, assess what Management Information or data points are required in order to assess outcomes. Conduct a gap analysis, and where gaps are identified, these should be added to the action plan for development or noted as a risk where relevant.
Within the report, ensure that an explicit summary assessment is provided for the results of any outcomes monitoring, along with supporting data / MI to show whether outcomes are being delivered in line with expectations and whether the firm is compliant with its obligations.
Ensure the report covers any material risks and issues that have been identified. The report should include an overview of the actions taken to address any risks or issues, and the Board should agree the action required to address any identified risks, as well as any action required to address poor outcomes experienced by customers.
Provide commentary in the report on the firm’s strategy and whether future business strategy is consistent with the firm’s obligations under Principle 12 and PRIN 2A. Any Board Approval should also reflect this point.
Deliver a robust action plan to support the report findings. The FCA has stated Consumer Duty is not a ‘once and done’ regulatory change. The expectation is that firms will improve and evolve on a continuous basis and ample weight should be given to the plans for next year, in addition to the look back and reflect for this year.
Perhaps above all, take the opportunity to stand back and reflect. Lots of work has been undertaken by firms, and many individuals have been ‘in the weeds’ of the elements they have been tasked with. Senior individuals need to challenge themselves and the business on what has materially changed to provide better outcomes for customers. What has worked well, what not so well, and what needs to be the focus for next year.

How can Square 4 help?

At Square 4 we specialise in regulatory compliance across the FCA agenda throughout the Wealth and Retail Lending sectors. Our specialist consultants have been supporting our clients in successfully writing and reviewing Consumer Duty Board Reports, delivering Outcomes Monitoring Frameworks, Price and Value assessments, developing MI, governance and control frameworks and other Consumer Duty and conduct-related issues.

Please get in touch with us at hello@square4.com, or the team below, should you wish to discuss how we might be able to support your firm further.