Target Newsletter - Issue 186 February 2023

ISSUE 186 - FEBRUARY 2023

PARADIGM TARGET NEWSLETTER

www.paradigm.co.uk/compliance/

4 Introduction from Paradigm Paradigm Consulting Graeme Stewart 7 Intelliflo Office Tackling the growing advice gap 8 Paradigm Consulting Consumer Duty Implementation Plans: Publication of Multi-Firm Reviews Graeme Stewart 12 Defaqto Analyse Critical Illness Cover policies side by side 14 Paradigm Consulting CP23/1: Insurance guidance for the support of customers in financial difficulty Matthew Blackburn 16 Paradigm Consulting FCA: Loan free fraud Partner Toolkit Graeme Stewart 18 Paradigm Consulting PS23/1: Extended asset retention requirement for firms under the British Steel Pension Scheme consumer redress scheme Matthew Blackburn 20 Paradigm Consulting FCA Supports firms through the transition to implementing the Consumer Duty Graeme Stewart

CONTENTS

New Cashflow Modelling

Inspiring conversations that lead to better customer outcomes

Fully integrated with Defaqto Engage, Cashflow Modelling seamlessly connects lifestyle planning into your investment advice process. Using a robust methodology, it makes it easy for advisers

to build an integrated financial life plan for their clients - pre and post retirement.

To find out more or to book a demo: Visit defaqto.com/advisers Call us on 01844 295 546 Email us at sales@defaqto.com

Accumulation | Decumulation | Protection

INTRODUCTION FROM PARADIGM CONSULTING

It is also worth mentioning that the teams are busy behind the scenes, with further support to help you prepare for the Consumer Duty’s start date, including: • A new Consumer Duty focused module for the Compliance Manual (which will contain the reporting templates that you will need from July going forward under the Duty’s regime). • Further follow up “On Film” presentations concentrating on the four Consumer Duty outcomes • We will also be reviewing our Disclosure templates to meet the Duty’s expectations, and • A new CPD Academy Test Zone module dealing with the Consumer Duty There’s lots going on and a real team effort being made, we will be publishing these in good time, ahead of the July implementation date, so please do keep a look out for our future updates. In this edition, we also publish details on the FCA’s thematic review, their campaign to tackle loan fee fraud and consultation paper on Insurance Guidance: for the support of customers in financial difficulty. I also want to say a huge thank you for all those that attended our Best Practice event in January, this was the first of six planned events. Congratulation's again to Graham

Graeme Stewart Head of Consultancy Paradigm

Hello and welcome to February’s edition of Target. I always think the longest month in the year is January, but crikey, how quickly it flew by this year, with no let up in the output from the FCA, particularly in relation to the Consumer Duty. A reminder then that the implementation date of 31st July will soon be upon us. Before then, your firm's implementation plan should be complete, and you should be ready for the reporting period starting from the end of July 2023 onwards. Our consultancy team have been concentrating on fine-tuning implementation plans when undertaking their visits with firms. We hope that the update, on page 8, detailing the FCA’s review of larger firms’ implementation plans will be helpful and timely for you.

4 TARGET NEWSLETTER

Smith who won our prize in naming them “Six of the Best Practice”, which we really hope are continuing to be key part of your CPD activities. We would especially like to thank everyone who stayed on for a few seconds at the end of the presentations to provide us with feedback, which is used to shape of our future events, so that we can deliver maximum value to you. In January, we talked about the 'Dear CEO letter' received by many firms along with the rather more emotive subject of wind-down planning. All the compliance update slides from the events, along with the contributions from our strategic partners Aviva and Defaqto, are now in the “ events ” section of the website if you want to catch up, or, review them again. In case you missed it, we launched our fifth installment of Consumer Duty on Film which looks into the practical solutions designed to help firms go forward with their completed implementation plan and highlight the key questions the FCA asked firms to consider as we continue the journey to July 2023. Our next Best Practice session, which will again look at practical ways to support you in preparing for the Duty, amongst other key updates, is only a few weeks away on the 14th March. If you haven’t done so already, please register and we look forward to welcoming you. On behalf of all the teams at Paradigm, we hope you enjoy reading this Edition of Target and take some value from it. We look forward to closely working and learning with you as we move on through the year, as the nights get lighter, and the heating csn be turned down a little more (thank goodness!).

5 TARGET NEWSLETTER

Tackling the growing advice gap

By Intelliflo office editorial team

from our survey results that many firms are taking positive steps to help those who are less likely to take advice. Over the last 12 months, more than two-fifths (43%) have hired junior advisers to take on some lower income clients, and the same number (43%) have taken on lower income clients as wealth in waiting. Over a third (35%) have carried out pro bono services, while a quarter (26%) have provided free advice workshops. In addition, four in ten (39%) firms have trained non-tech-savvy clients on how to use technology in the advice process. In fact, 95% of advisers believe that technology is crucial to bridging the advice gap and reaching those who don’t typically access advice. At intelliflo, we firmly believe that adopting technology to its best effect will make it possible for the sector to reach thousands more clients and, not only that but help people engage more with their financial plan. Embedding technology effectively into the advice process helps deliver cost savings through improved efficiency and economies of scale that firms can pass on to clients through lower fees. It can also deliver a viable business case for widening access to advice by increasing the profitability of working with clients with lower investible assets. With continued economic uncertainty and growing pressure on income at every stage of our lives, it’s clear that more people would benefit from taking professional financial advice. By working together, we can continue to find ways to make advice accessible to a broader range of people to help them achieve better financial outcomes. Get in touch to find out how intelliflo office can drive your business forward.

Our latest Advisory Business Impact poll shows that almost three-quarters of advisers (73%) believe the advice gap has widened over the last five years, with six in ten (62%) blaming the pandemic for increasing the gap. Given the current economic environment with rising inflation, a cost of living crisis and looming recession, it’s unlikely that the need for professional financial advice will change any time soon. Increasing demand for advice Against this backdrop, it’s not surprising that demand for advice continues to grow: in difficult times like these, having a financial plan in place is crucial to maintaining a sense of control over your money. This is borne out by the fact that more than half (58%) of the advisers in our survey have seen an increase in people seeking advice in the last 12 months. However, while demand is increasing, the supply side is not. The number of advisers in the UK increased by just 3% in the two years to 2020 according to FCA figures. The issue of demand for advice outstripping supply is highlighted in our survey, with a third (34%) of financial advisers feeling they don’t have time to service any more clients while a similar number (31%) say they don’t need more clients. And it’s the lower value clients who are most likely to lose out: nearly a third (29%) of respondents lack the time and resource to service lower value customers. Additionally, over two-fifths (45%) of firms argue that the high cost of servicing clients won’t be covered by those on lower incomes, which prevents them from extending their services to those who typically don’t access advice. Bridging the gap However, there are ways that we as an industry can work together to bridge the advice gap. We were encouraged to see

7 TARGET NEWSLETTER

Paradigm Compliance Update

Consumer Duty Implementation Plans: Publication of Multi-Firm Reviews

Our Summary of the FCA’s Key findings Governance and oversight Good Practice • Many firms have developed robust governance frameworks for their implementation work, with clear accountability for delivery and board oversight. • The FCA identified that the plan had been scrutinised and challenged by firms’ boards, executives and their audit and risk functions. For example, through questioning resource requirements and interaction with other ongoing project work. In one example, a firm is delivering one-to-one deep dive sessions with board members on plan deliverables. • Most firms have appointed a Consumer Duty champion at an appropriate level to ensure that the Duty is discussed in a meaningful way. The FCA identified an example where a firm with a large group structure has appointed two champions to reflect the diversity of its different regulated entities. The FCA will continue to engage with firms and a survey will be sent out shortly to a sample of small firms to help the FCA understand what progress is being made in that sector. Further, targeted engagement of small firms will also be undertaken by the FCA. In addition, some firms will already have received a follow up letter “Implementing the Consumer Duty in the Consumer Investments sector”, which is a reminder of the FCA’s expectation on firms, and you will also have been made aware of the regulator’s upcoming in person events on Consumer Duty. Finally, Paradigm will also continue to produce “On Film” events to support firms.

Graeme Stewart Head of Consultancy Paradigm Consulting

Introduction

The FCA has recently published their findings following a multi-firm review of Consumer Duty implementation plans. They have reviewed the implementation plans of larger “fixed” firms who have a dedicated supervision team at the FCA. They did this to better understand firms’ approach to embedding Consumer Duty within their business. • The firms’ approach to governance and arrangements for ongoing oversight of their implementation plans. • The deliverability of firms’ plans. • Firms’ culture and people strategies to ensure that their business is focused on delivering good outcomes for consumers PARADIGM COMMENT Paradigm believes that firms, and in particular the SMF16, will want to read this update from the FCA as you and your firm continue to develop and progress the work contained within your Consumer Duty implementation plan. and that all staff understand their responsibilities under the Duty. They considered a range of different factors including:

8 TARGET NEWSLETTER

• Many plans detailed clear arrangements for ongoing scrutiny of their firms’ implementation work by the board, executive and their audit risk functions. For example, by making the Duty a standing agenda item at key governance forums and through plans for independent reviews of implementation work by risk and other compliance or internal audit functions. ◊ The FCA also saw evidence of firms involving risk and compliance and internal audit teams in a timely way, including: ◊ Frank assessments by these teams of current risks to successful and timely delivery. ◊ Assurance of the effectiveness of controls in place over Duty implementation. ◊ Planned assurance work before the deadline on implementation, with immediate and further assurance work planned after the deadline. • Some firms had established central co ordinating forums to drive consistency in interpreting the Duty across different

business functions, or for co-ordinating required changes to systems and technology across workstreams. Areas for improvement • The FCA identified plans that gave little detail on who is leading the overall implementation programme and who was responsible for it. • In some cases, there was more limited evidence that the firms’ boards and committees had properly scrutinised and challenged plans. In one example there was no evidence of engagement with the firms’ Chair or non-executive directors and the board only asked one question before approving the plan. In another example the board minutes showed that the plan was approved without discussion. • Some plans gave no timings to actions required.

Continued on next page...

7 TARGET NEWSLETTER

Culture and people Good Practice

Third Parties Good Practice

• Plans set out a clear people and training approach to ensure all staff understand their responsibilities under the Duty. Different approaches were proposed to engage staff, including all-staff training as wells as role-tailored training. • One firm set out plans to explain its purpose and values in a way aligned with delivering good consumer outcomes, updating internal cultural and training materials to reflect this as appropriate. Another firm detailed how it will embed the Duty in its strategy, governance structure and decision making. • Some plans confirmed firms will review reward and incentive structures and performance management frameworks at all levels to ensure they reflect the Duty. One firm noted it plans to incorporate the Duty within the design of its staff performance scorecard. Others explained that their SMCR regime will be updated to include the Duty, with senior leaders expected to lead the cultural change needed. Areas for improvement • A lack of detail about how the Duty will be embedded in firms’ culture and people approach. • Clear mapping of the milestones that need to be achieved to have a realistic prospect of meeting the implementation deadline. • Clear commitment of resources needed to meet expectations. • Clear identification of risks. The most Deliverability Good Practice

• Clear identification of dependencies with third party providers. Areas for improvement • Lack of recognition of the dependencies with third parties. In some cases, it was also unclear what, if any, engagement had taken place or was planned.

The four Consumer Duty outcomes Good Practice

Products and Services

• Some firms had identified where they will need to build on existing governance and assessment frameworks to meet the new requirements under the Duty. For example, one firm acknowledged that it needs to collect greater granularity of information to ensure the design and management of its products and services is aligned to the needs, objectives and characteristics of customers in the target market. Another firm explained it is developing a product level management dashboard with metrics to monitor the performance of its products. Price and Value • Clear consideration is being given to whether products or services offer fair value to different groups of customers, including those with characteristics of vulnerability. • Consumer Understanding • Firms considering how to give customers the information they need, at the right time, and presented in a way they can understand to make effective decisions. • One firm set out plans to carry out testing of communications pre-release, post release and on existing content. • Consumer Support • Some firms identified specific customer journeys that need to be improved to better support customers in vulnerable circumstances, including new

effective examples of this provided an adequate explanation of the risk, proposed mitigation strategies, with assigned people to deal with them.

Areas for improvement • Unclear / confusing timelines

10 TARGET NEWSLETTER

PARADIGM COMMENT The publication of these findings provides much food for thought as firms work on their own implementation plans and we will focus on how firms can benefit from considering these findings at our next Best Practice workshop on 14th March ( register here ) All the support Paradigm offers is contained in the “Hot Topics” section of our website. You can also check out our Consumer Duty hub in the public area of the Paradigm website. If you have any queries, or need further assistance, please contact your usual Paradigm Consultant or helpdesk@ paradigm.co.uk. mechanisms for customers to notify the needs of vulnerability. For example, one firm explained it is giving particular focus to bereavement, fraud and complaints processes. Areas for improvement • Insufficient detail, for example “review customer-focussed policies and procedures to ensure they capture and reference the requirements of the Duty” as an action point does not indicate how firms have interpreted the Duty’s requirements and considered the challenges of how they will apply them to their business, or the outcomes they are aiming to deliver. Data Strategies (MI) Good Practice • Firms who had considered the outcomes they are aiming to deliver also tended to have considered the data they need to measure and monitor the delivery of these outcomes. Areas for improvement • Little detail on how data will be gathered, monitored and acted upon.

11 TARGET NEWSLETTER

Analyse Critical Illness Cover policies side by side

By Defaqto editorial team

Defaqto scores 35 conditions (including the 21 conditions set out in the ABI guidelines) accounting for 98.9% of UK claims. With CIC Compare you can quickly and confidently compare 145 conditions, making it easy to cater to their clients’ individual needs. The tool is continuously updated with new products and enhancements to existing products by Defaqto’s insight and research experts. This means CIC Compare can be used to contrast not just the current version of products but also earlier versions and closed plans. Additionally, CIC Compare can drive further efficiencies through its automatic inclusion of your own notes in the final report, which also includes detailed policy wording. CIC Compare is integrated into the end-to end financial planning tool, Defaqto Engage. CIC Compare supports you to provide transparent suitable advice by allowing you to easily compare CIC policies side-by-side. The solution ensures that your clients can select the most comprehensive policies, with the most fitting wording of CI definitions for their specific needs.

With several factors to consider, Critical Illness Cover (CIC) policies are complex and analysing them is time-consuming. Defaqto’s critical illness cover comparison tool, CIC Compare, provides an easy-to-use way for advisers to compare new and historic critical illness policies in under five minutes, on a whole of market basis, including white labels and direct products. With a focus on the definition of the condition rather than just the statistical risk, Defaqto partnered with critical illness pricing experts to develop a unique methodology for scoring conditions. This expertise was then applied to Defaqto’s detailed historical database to allocate scores to the main critical illness definitions of all policies dating back to 2009. The scores allocated to each definition are based on the likelihood of being able to claim in the event of contracting the condition. Specifically, how it relates to the insured population where serious illness is less prevalent than it is for the whole population.

Learn more about CIC Compare here.

12 TARGET NEWSLETTER

New Cashflow Modelling

Inspiring conversations that lead to better customer outcomes

Fully integrated with Defaqto Engage, Cashflow Modelling seamlessly connects lifestyle planning into your investment advice process. Using a robust methodology, it makes it easy for advisers

to build an integrated financial life plan for their clients - pre and post retirement.

To find out more or to book a demo: Visit defaqto.com/advisers Call us on 01844 295 546 Email us at sales@defaqto.com

Accumulation | Decumulation | Protection

Paradigm Compliance Update

CP23/1: Insurance guidance for the support of customers in financial difficulty

By Matthew Blackburn Consultant (Technical Helpdesk)

Introduction The FCA has launched a consultation that sets out proposals to help protect clients who are in financial difficulty and hold non-investment insurance policies. The consultation also provides details of the Regulator’s expectations of firms in supporting their clients. If the proposals are confirmed then this guidance, that will apply to all insurance clients in financial difficulty, will replace previous guidance for insurance clients in financial difficulty due to the pandemic. Potential actions The proposed guidance is intended to help firms more clearly identify what they can consider doing to provide support to clients in financial difficulty with the result that clients are better protected, no matter which firm provides their insurance cover. Possible actions could include • Reassessing the client's risk profile; • Considering if other insurance products may provide the cover that’s needed at a more affordable price; • Adjusting cover to reflect the client's changing financial circumstances; • Working with clients to avoid the cancellation of important cover; and • Where a policy is adjusted or cancelled, looking at whether it is appropriate to apply payments of related fees and charges.

Reasonable steps The FCA also expects firms to take

‘reasonable steps’ to make clients aware of, and help them understand, what support

14 TARGET NEWSLETTER

is available and to allow clients to contact firms easily. This could include:

PARADIGM COMMENT Firms that act as insurance intermediaries need to be aware of the new proposals and how they extend the Regulator’s expectations around how firms deal with clients with non-investment insurance policies in financial difficulty to include all such clients and not just those adversely affected by Covid. It also seems clear that Consumer Duty is a factor that firms will need to take into account, especially the requirement for firms to have processes in place to avoid causing foreseeable harm to clients including those in financial distress. If you have any queries, or comments about this update, please contact your usual Consultant or the Technical Helpdesk on 0161 486 4891, by email at helpdesk@ paradigm.co.uk or using the chat facility on the Paradigm website .

• Having sufficiently prominent information on general communications such the firm’s website, apps and recorded messages; • Having sufficiently prominent information on direct communications to clients such as those about missed payments; and • Looking at the different ways clients can contact firms when they need help and how these meet the different communication needs of clients. Next steps Comments on the consultation can be made using the online response form , in writing to Toby Stubbs, Financial Conduct Authority, 12 Endeavour Square, London E20 1JN or by email to cp23-1@fca.org.uk . This consultation ends on 11 March 2023 and the FCA aims to publish a final Policy Statement by the end of June 2023.

15 T ARGET NEWSLETTER

Paradigm Compliance Update

FCA: Loan fee fraud Partner Toolkit

What is loan fee fraud? Loan fee fraud is when someone who is looking for a loan is asked to pay an upfront fee before receiving it. They pay the fee, but they never get the loan. The FCA say that there has been a 1,900% increase in searches for “no refusal payday loans*”. As a result the FCA are relaunching their campaign to protect people from loan fee fraud. Scammers target people who are looking for loans online. They will contact their victims, via cold calls, cold emails or social media platforms, to offer them a loan often pressurising people to pay an upfront fee quickly. Who is most at risk? The targets are usually financially vulnerable people: • Aged 25 to 45 (average age 37) • Male 60%, female 40% • Working in manual occupations or unemployed What are the FCA doing about this? The FCA’s campaign launched in January 2023 and will be promoted through partnership and search advertising activity. The aim is to go through a 3-step loan fraud checklist to help people protect themselves, with the key messages.

Graeme Stewart Head of Consultancy Paradigm Consulting

Introduction The FCA has recently published their “Loan fee fraud Partner Toolkit” launching their campaign to tackle this issue. In addition the FOS has also recently published their update on the support and assistance they can offer to clients who have been affected by a fraud or a scam if they feel that their bank or financial provider hasn’t done enough to help them. PARADIGM COMMENT Paradigm believes that firms will want to update themselves on this issue to create awareness with their clients and to offer support and guidance to them on protecting themselves from loan fee fraud and how they may complain, if they have been subject to fraud and believe that their own bank or financial provider hasn’t done enough to help them.

16 TARGET NEWSLETTER

Looking for a loan? Pause and do the 3-step check: • Cold called? • Asked to pay an upfront fee? • Pressurised to pay quickly or unusually?

Tick any of these? STOP

Protect yourself from loan fee fraud.

Supporting the Campaign There are a range of resources to make it as easy as possible for firms to get involved and support the campaign.

* Sources of Citizens Advice and Google analytics

PARADIGM COMMENT Loan fee fraud is a menace, particularly in this cost-of-living crisis and the FCA want to increase awareness of this to help people protect themselves from being a victim of this scam. If you have any queries, or need further assistance, please contact your usual Paradigm Consultant or helpdesk@ consultparadigm.co.uk .

17 TARGET NEWSLETTER

Paradigm Compliance Update PS23/1: Extended asset retention requirement for firms under the British Steel Pension Scheme consumer redress scheme

By Matthew Blackburn Consultant (Technical Helpdesk)

Rules extension The new rules extend the asset retention requirement and will apply until firms have resolved all BSPS cases in scope of the redress scheme and some BSPS cases that fall outside the scheme such as certain complaints that have been referred to FOS and cases that are subject to a past business review but would otherwise have been in scope. The rules apply to firms that provided BSPS advice between 26 May 2016 and 29 March 2018 unless they only provided BSPS transfer advice to one or two clients or they are sole traders or unlimited partnerships. Before 31 January 2023 the rules did not apply to firms who had four or fewer cases that were in scope of the BSPS redress scheme. Financial Resilience Assessment Firms that are subject to the asset retention rules must assess whether they are likely to meet their potential BSPS redress liabilities on a monthly basis and complete a Financial Resilience Assessment (FRA). The calculation is detailed in full in Chapter 5 of CP22/22 Proposed extended asset retention requirement for firms under the British Steel Pension Scheme consumer redress scheme . Firms that have not previously completed an FRA - firms that have three or four BSPS redress cases - must report the outcome of the assessment to the FCA by 28 February 2023. Asset restriction rules If the FRA suggests that a firm may not have sufficient assets to meet its estimated BSPS liabilities, the asset restriction rules will prevent it from making certain transactions

Introduction The FCA has published final rules to extend the asset retention requirement for some firms that provided transfer advice to British Steel Pension Scheme (BSPS) members. This requirement is designed to ensure that firms that gave bad BSPS advice meet the cost of the redress liabilities that arise and reduce the risk of their failing with costs then passing to FSCS levy payers.

18 TARGET NEWSLETTE8

that are not ‘in the ordinary course of business’.

Firms subject to the asset restriction rules would be able to continue carrying on their ordinary business, such as making salary payments and pension contributions and paying general operating costs, but could not carry out other transactions that might reduce the assets that they have to meet potential redress liabilities. Firms that have assessed and notified the FCA that they have sufficient assets to meet their estimated BSPS liabilities are not affected by the asset restriction rules. Next steps The asset retention rules were extended with effect from 31 January 2023. In-scope firms are required to complete an FRA at least monthly, and immediately if the terms or availability of their PI insurance change or there is any other change in circumstances that could materially reduce their ability to meet BSPS claims. If the outcome of the FRA changes then the firm needs to re-notify the FCA. Firms that arranged three or four in scope BSPS transfers must report the outcome of their first FRA to the FCA by 28 February 2023. The asset restriction rules apply to these firms until they have reported the outcome of their FRA to the FCA confirming that they can meet claims for unsuitable BSPS advice. If you have any queries, or comments about this update, please contact your usual Consultant or the Technical Helpdesk on 0161 486 4891, by email at helpdesk@ paradigm.co.uk or using the chat facility on the Paradigm website.

19 TARGET NEWSLETTER

Paradigm Compliance Update

FCA Supports firms through the transition to implementing the Consumer Duty

• 31st October 2022 firms’ boards or management bodies should have agreed their plans for implementing the Duty. • By the end of April 2023 manufacturers should have completed all reviews necessary to meet outcome rules and shared necessary information with their distributors. • The Duty comes into effect on 31st July 2023 for new and existing products or services that are open to sale or renewal. • On 31st July 2024 the Duty comes into force for closed products or services. Overview of the requirements of the Duty The FCA summarise the four Duty outcomes cross referenced to their Finalised Guidance paper FG 22/5. We set out the key highlights from the letter in this article, and Paradigm will also be providing further support through our “On Film” series, which will be extended to include four new presentations dealing with each of the Duty’s outcomes, so do look out for these presentations, which we hope firms will share with all their staff as appropriate. PARADIGM COMMENT The letter relevant to us is a must read for SMF’s within a practice and for the team(s) behind the implementation plan work. We recommend that a CPD record is maintained to evidence that the SMF responsible has made themselves fully familiar with the content of the letter.

Graeme Stewart Head of Consultancy Paradigm Consulting

Introduction The FCA has recently published a series of letters under the title “FCA supports firms through the transition to implementing the Consumer Duty”. They comment: “As firms continue to get ready for the implementation of the Consumer Duty, the FCA is supporting firms through the transition with a program of engagement, which includes setting out in letters the expectations of the Duty and arranging a series of regional in person events for specific groups of small and medium-sized firms”. The letter that is relevant to our firms is the “Implementing the Consumer Duty in the Consumer Investment sector” version. In addition, the FCA has announced a series of live events across the UK running from 21st February until 15th June 2023. The events are charged at £85 per person and there are investment and mortgage focused versions. Paradigm believes that many firms will want to attend these regional events and firms can reserve their place with the FCA book here . The timeline The FCA remind firms of the timeline for the introduction of the Duty:

• Products and services are designed to

20 TARGET NEWSLETTER

meet the needs, characteristics and objectives of a specified target market • Price and Value: Products and services provide fair value with a reasonable relationship between the price consumers pay and the benefit they receive • Consumer Understanding: Firms communicate in a way that supports consumer understanding and equips consumers to make effective, timely and properly informed decisions. • Consumer Support: Firms provide support that meets consumer’s needs throughout the life of the product or service. The FCA highlights also that a key part of the Duty is that firms are able to define, monitor, evidence and stand behind the outcomes their customers are experiencing. This monitoring* must enable firms to identify where customers, or groups of customers, are experiencing poor outcomes, and where this is the case firms must take appropriate action to rectify the situation. *Paradigm will be supporting firms with a monitoring, or reporting template to meet this requirement, following the implementation of the Duty. We will publish this in good time ahead of the implementation date. Four key FCA Concerns Whilst firms must be ready to address all the elements of the Duty, the letter sets out four areas where particular focus is needed. Mainstream investments: The FCA believe that consumers are at risk of receiving services that do not meet their needs or represent poor value, which may be due to the nature of the service(s) they are receiving and/ or the underlying charging structure. Higher risk investments: The FCA comment that some consumers continue to be invested in unsuitable high risk investments. Firms need to make sure that their products and services are appropriately designed

for the needs and objectives of their target market, and that they are properly designed for the needs and objectives of their target market and that they are being promoted and distributed effectively. Scams and Fraud: The FCA believe that too many consumers are losing money due to scams and fraud. Firms must act to avoid causing foreseeable harm to their customers and take appropriate action to help stop consumers falling victim to scams and fraud. Consumer Redress: The FCA expect firms to act in good faith when they identify they have caused harm (either through their actions or inactions) and to take appropriate proactive steps to rectify the situation, which may include customer redress, which where due should be paid promptly. The FCA mention that they have updated firms following their review of larger firms’ implementation plans which we provided firms with a compliance update on 3rd February. Further things to consider The remainder of the letter’s two annex’s deal with the four Duty outcomes, in more detail. Firms will be actively working on each of these outcomes as they follow their own implementation plan.

PARADIGM COMMENT All our support and guidance to firms on the Duty, continues to be held in one easy access, central location which is the “Hot Topics” section of our website. If you have any queries, or need further assistance, please contact your usual Paradigm Consultant or helpdesk@ consultparadigm.co.uk .

21 TARGET NEWSLETTER

www.paradigm.co.uk/compliance/ 0161 486 4890 enquiries@paradigm.co.uk