Context
As the FCA's Sheldon Mills cited in his last speech, 'the clock is also ticking for closed products and the deadline is approaching rapidly'. However, as firms expedite their implementation plans in advance of July, there is a tangible risk that these firms are adding risk back into the programme by reducing the evidential bar, oversimplifying the analysis and/or creating an inconsistency in how they are applying the Duty.
In this short article, KPMG in the UK highlights five red flags (unique to closed product implementation) that we've identified to look out for that your firms may not be aligning to FCA expectations. As seen with Open Products, the FCA will be challenging firms, in short order, on 'what's changed?', so collating and assessing this evidence is a vital activity in the run-up to July. In gaining this comfort, the robustness and objectivity of the challenge applied will be critical — whether this is carried out internally or via external assurance. We suspect that the FCA will be in a less forgiving mood this July compared to last, thereby amplifying the risk — and need for assurance.
The Closed Product deadline is not the only regulatory imperative — with Board Assessment reports also taking up bandwidth at this crucial time. To assist here, we have separately set out here the vital ingredients to help you approach, design, build and execute the report successfully.
Based upon the conversations with, and support to, firms across all sectors, we have been compiled five red flags for firms to look out for on their programmes which may indicate a misalignment with FCA expectations. This article covers, in more detail, how firms need to think differently to successfully implement the Consumer Duty for closed products.
It is worth highlighting that a red flag does automatically mean that the firm will be in breach. However, the firm would need to have comparatively more data/ MI and rationale to evidence good customer outcomes — and that these conclusions are both objective and robust.
How KPMG in the UK can help
We are happy to share further insights on the work they are doing with clients on closed products — for example, specifically providing assurance about the robustness of challenge and objectivity of treatment strategies and the accumulated evidence.
More generally, KPMG in the UK continues to support firms with building and assessing board reporting, broader assurance reviews, price and fair value benchmarking, associated technology and tooling for embedding the duty, and developing strategies to help take advantage of the commercial opportunities that the Duty offers.
If you would like to hear from an experienced KPMG professional or if you require specific support on your Consumer Duty programme and/or BAU embedding activities, please do not hesitate to get in touch.
All our other articles on Consumer Duty are accessible on our Consumer Duty hub.
