I wonder how many CEOs within asset and fund management firms earmarked this new regulation as a priority for them personally?
There a number of reasons why it may not have been prioritised:
1. It is a period of consultation so no hard and fast rules have yet been agreed.
2. New rules are not due to be in force for at least another year.
3. It sounds very like a refresh of the Treating Customers Fairly rules that are already in place.
If you are a CEO that has this proposed new regulation in sight, there is a strong likelihood the task of considering/responding to it has landed with senior managers elsewhere within the firm.
The FCA is determined to improve financial services for end consumers and what they are proposing will go much further than the Treating Customers Fairly regulation.
They are looking across the entire value chain to minimise buck-passing and they are keen to get this moving quickly.
They want to see heads of firms actively engaged in making change happen.
While many may regard additional regulation as unwelcome, Consumer Duty offers CEOs a major opportunity to transform their businesses.
Rather than focusing on ticking off rules, if done thoroughly, embedding a customer experience framework can boost productivity, reduce costs and differentiate your offering from the competition.
Ambitious firms always want to push the boundaries and this can lead to exciting new developments but only if there is a clear understanding within the firm of where the boundaries are.
This is where the role of the CEO is so important.
Strong leadership sets the culture of any firm and CEOs are in control of the agenda.
Communication of clear vision and values from the CEO is a fundamental building block to success…assuming it is not just words.
The most successful organisations have CEOs who live and breath their values.
Arguably, sometimes those values can lean more towards profit and shareholders rather than in the best interests of customers and this is why the FCA is stepping in with a regulation that ensures customers are prioritised.
The regulation is likely to task CEOs with more than addressing internal functions.
The FCA wants to see the entire financial industry work much more closely together to deliver a better result for consumers.
For example, data has a big part to play in throwing a spotlight on consumer behaviour.
Often, platforms and advice firms are guarded in what they deem appropriate to share in terms of end-investor information.
Without data that helps identify customer demographics and behaviour being accessible along the value chain, the task of developing meaningful products and services is highly challenging.
The FCA would like to see this change.
While everyone has a part to play in achieving that goal, CEOs, as leaders, are ideally placed to work with other industry heads to bring this to fruition.
The FCA consultation, while not being a finalised regulation, set out some clear pointers about the regulator’s direction of travel.
What should CEOs be doing now to shape their firms to meet the new challenges?
Define a roadmap
Developing a roadmap is a good place for any CEO to start. Important points to include are:
Embrace the process and lead by example. Engage in an objective and frank assessment of where your firm currently stands and areas that need attention;
Develop and communicate a clear customer-oriented strategy – and optimise your proposition and operating model to deliver it;
Include all employees – everyone has a voice in helping understand how to meet the diverse needs of consumers and everyone should take responsibility;
Embed this culture for the long-term by establishing effective measurement methods, governance and feedback loops;
Seek out and cooperate with other CEOs across the value chain to open up access to information and data that will inform overall consumer understanding. This is perhaps one of the most challenging aspects…and where leadership is paramount;
Set a timeframe for action.
There is not much time before consultation turns into regulation.
Some firms within financial services are already well ahead of the curve on embedding a consumer-led culture within their organisations.
If you are a CEO who is yet to do so, it is time to engage with what the FCA is proposing and take action.
All your stakeholders will thank you for it.
Mary Wong is an associate partner at the PEN Partnership
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