Consumer Duty, one year on
The Financial Conduct Authority (‘FCA’) introduced the flagship ‘Consumer Duty’ regulation in July 2023. It established a new Consumer Principle requiring firms to “act to deliver good outcomes for retail customers.” Consumer Duty includes rules that mandate firms like ours to avoid serious harm, support customer financial goals, and act in good faith towards customers.
The key focus of Consumer Duty is on Four Outcomes that seek to drive good outcomes for retail customers being:
- products and services
- price and value
- consumer understanding
- consumer support
At Stellar, our core principles and beliefs have always centered around prioritising our customers. However, it was essential to document certain actions to ensure that we are clear how we continue to deliver the best possible outcomes for our clients.
What is Consumer Duty?
Consumer Duty, represents a landmark regulatory framework aimed at elevating the standards of consumer protection provided by financial services firms to their customers. This initiative underscores the FCA’s commitment to ensuring that consumers are treated fairly and that their interests are placed at the heart of business operations. Key elements of Consumer Duty include:
- Enhanced Standards of Care
- Improved Customer Understanding
- Robust Product Governance
- Fair Pricing and Value
- Continuous Monitoring and Improvement
The implementation of Consumer Duty by the FCA is designed to foster trust in the financial system, stimulate market competition, and shield consumers from harmful practices. This forward-thinking strategy not only protects consumers but also encourages a more transparent and robust financial marketplace.
Getting Started
When Consumer Duty was introduced, we soon realised that many of its requirements were already part of our operations. We had already chosen to eliminate initial fees for our services; easily ensuring transparency by having no upfront costs, and started to monitor our customer service standards meticulously.
In November 2023, we joined the Consumer Duty Alliance as an affiliate member. The Consumer Duty Alliance is an independent, non-profit community interest company that aims to assist the retail finance sector in successfully implementing the FCA’s Consumer Duty.
We also formed a Consumer Duty Committee and appointed Craig Reader, Chair of Stellar, as our Consumer Duty Champion. Since assuming this role, Craig has offered invaluable support and guidance across various business areas, including leading a significant initiative: the creation of our Consumer Duty Guides for Distributors. These documents, first published in March 2023 and updated in March 2024, have been positively received by our network of FCA-authorised adviser firms (distributors) and demonstrate our commitment to providing fair value compared to our competitors. The updated guides are accessible on our webpage dedicated to our Consumer Duty activities.
Embedding Consumer Duty
We held several company-wide training sessions on Consumer Duty via Breakfast Briefings in 2023 and 2024. Additionally, our client-facing staff received continuous training on serving vulnerable customers, including an online exam to enhance their knowledge on ensuring equitable outcomes.
Our culture, emphasising Respect, Ambition, Transparency, Adaptability, Collaboration, and Integrity, is clearly communicated through meetings and our website.
We have implemented quarterly outcome monitoring using a detailed matrix and a RAG rating system to assess customer outcomes. This helps us identify areas for improvement.
As of 31 July 2024, our first Consumer Duty Annual Board Report has been approved and can be requested at enquiries@stellar-am.com.
Conclusion
We aim to utilise talent, technology, and innovation to provide leading investment management solutions for retail clients seeking to mitigate liabilities to inheritance tax. Deep rooted in our mission to prioritise investors in all circumstances, we integrate Consumer Duty principles to ensure positive outcomes and mitigate foreseeable harm.
Consumer Duty drives improved customer results and guarantees our commitment to retail service excellence. Glen Halley (Fund Operations Manager) remarked, “It’s been gratifying to see the organisation easily prioritise the adoption and embed Consumer Duty. It did not change our activities as we have always adopted these principles. However, we are delighted to be able to spotlight the positive outcomes we have always sought for our customers.
The FCA indicates that this is an ongoing effort, and we will continue to monitor our services to deliver good outcomes for all customers.
Though our recent focus has been on open products, we remain attentive to investors in our closed products, with comprehensive outcome monitoring in place too.”
Fund Operations Manager