Consumer Duty training – dispatches from the front line
As we approach the implementation date for the new Consumer Duty, it is important to keep in mind the fundamental cultural shift that it represents for firms involved in retail financial markets. As regulators and senior industry figures have highlighted, the success of the Duty relies on its ethos being embedded into a firm’s DNA.
At CCL Academy, we have been delivering eLearning, virtual and face-to-face training to all of the major sectors impacted by the Duty, and at all levels of an organisation. This has provided a unique perspective on the challenges firms are facing when implementing the higher and clearer standards required by the Duty. It has also helped us develop techniques to ensure that Consumer Duty training is engaging and effective, and that it promotes the right cultures and behaviours within firms.
So, what are the key takeaways, and how can they help firms ensure that their overall approach to compliance training is effective?
Back to basics – what does the FCA require in terms of Consumer Duty training?
PRIN2A.8 requires firms to:
“Ensure that Principle 12 and the [associated] obligations…are reflected in their strategies, governance, leadership and people policies, including incentives at all levels.” It goes on to say that retail customer outcomes should be a central focus of “the firm’s risk control arrangements under SYSC.”
This is reinforced by FG22/5, which highlights general requirements in relation to culture, governance and accountability, and identifies specific questions that the firm should consider in relation to its arrangements.
However, in relation to training, the FCA doesn’t provide much more detail than that - perhaps, because the importance of training is emphasised across the entire regulatory framework.
For example, under Section 64B of the Financial Services and Markets Act, firms are required to notify relevant staff of the Conduct Rules that apply to them and “take all reasonable steps to secure that those persons understand how those rules apply in relation to them.” The FCA has reinforced this message, setting clear expectations in relation to Conduct Rules training. In particular, the FCA has highlighted that good Conduct Rules training should:
- Be interactive and based on realistic and challenging scenarios
- Bring to life real questions that relate to people’s jobs
- Put the Conduct Rules into the context of the overall SM&CR
These requirements have a direct read-across to Consumer Duty training, particularly given the fact that the Duty introduces a new Individual Conduct Rule (You must act to deliver good outcomes for retail customers).
Whilst these requirements are certainly not the only source of guidance in relation to training, they are a useful starting point, and should provide the foundation for a firm’s approach to compliance training.
Five strategies for effective training
So, what can firms do to make their Consumer Duty training impactful and effective? And how should these strategies feed into the firm’s broader approach to regulatory training? Here are five practical steps you can take.
The Consumer Duty impacts everyone within the organisation – but not necessarily in the same way.
Therefore, you need to think about the different roles within the organisation. Then consider the specific knowledge and skills each of these roles requires to meet the substantive requirements of the Duty, for example in relation to the four outcomes.
We have worked with a number of clients to help them map out the learner population and develop role-specific training that meets the particular needs of each group of learners.
When undertaking this exercise, don’t forget about your control and support functions. FG22/5 specifically requires firms to ensure “that individuals throughout the organisation – including those in control and support functions – understand their role in delivering the Duty.”
So, you need to make sure that staff at all levels receive appropriate training to help them understand their responsibilities under the Consumer Duty (bearing in mind the new Conduct Rule and the specific training requirements associated with it).
For example, you should consider what resources and training materials are available to the Consumer Duty champion and the firm’s control functions (such as compliance staff) to help them understand their role.
One of the key messages underpinning the Consumer Duty is to ‘put consumers at the heart of the firm’s business.’ The same principle applies in relation to your learners – put them at the heart of your training.
This means that you need to make your training practical. Training that is overly legalistic or which simply repeats the FCA rules is not going to help staff understand what is expected of them and how they must behave to meet the standards required by the Duty.
So, whether the training is delivered via eLearning or in the classroom, case studies should be a key component. These are essential to help learners understand what the rules and outcomes mean in practice.
Linked to this is the need to tailor the content to your business. The Consumer Duty impacts a broad range of sectors within retail financial services. Therefore, it is important to ensure that the case studies are realistic and that the training messages resonate with your learners.
This is easy to achieve in classroom engagements, where discussion is a key element of the training. But don’t forget about your eLearning. We have worked with many of our eLearning clients to tailor our generic Consumer Duty course, so that the content and case studies reflect their specific business requirements and needs.
Benjamin Franklin famously said, “Tell me and I forget; Teach me and I remember; Involve me and I learn.”
Consumer Duty training is not just about transferring knowledge. It is about helping staff understand the cultural shift that the Duty represents, and making sure that they engage with their personal responsibilities.
To be truly successful, Consumer Duty training needs to win hearts and minds. This is why it must be interactive. It needs to bring the key messages to life in an engaging and impactful way. Ultimately, it should start a conversation within the organisation about what it means to “put consumers at the heart of the firm’s business”.
Training that is simply designed to tick a box risks undermining the firm’s entire implementation strategy. Remember, strong policies don’t necessarily translate into a good compliance culture – Enron’s Code of Ethics was a comprehensive and well-written document, and we all know how that ended.
An important part of complying with the Duty is making sure that your firm continuously reviews and learns from the actual outcomes experienced by customers. As a result, monitoring and reporting are critical components of a firm’s ongoing compliance with the Duty.
Firms will need to develop new metrics to test and measure the effectiveness of the processes they have put in place to deliver good outcomes for retail customers. This information must be reported to senior management and may need to be disclosed to the regulator.
FG22/5 highlights training and competence records as one of the sources of information that firms may want to consider. It is, therefore, important to make sure that your training provides you with robust management information (MI) which gives you confidence that employees understand their responsibilities.
For example, many firms deploy eLearning and track both completion and assessment scores. But the data that comes out of an eLearning assessment is only as good as the effort that went into it. If a multiple-choice test asks, ‘What date does the Consumer Duty come into force?’ does that really give you confidence that people understand their responsibilities under the Duty? Or does it simply tell you that their short-term memory is working well?
So, you’ve reviewed your processes, you’ve launched your policies and you’ve trained your staff. Job done? Not by a long stretch!
The Duty is not a one-off event. It is a way of life for firms involved in retail financial services. The same applies to your training – it is the start of a conversation with your staff about what it means to deliver good outcomes for retail customers.
So, your training needs to adapt and grow with the firm’s approach to the Duty. Once the Duty is embedded within the firm, ongoing training needs to be developed. This can be used to:
- Remind staff about their responsibilities in relation to the Duty
- Share the firm’s successes
- Highlight developments and process improvements
There is no doubt that the Consumer Duty represents a significant undertaking for firms involved in the manufacture and/or distribution of retail financial products and services. However, the opportunities associated with the Duty are incalculable.
The Duty should lead to a major shift in the way retail financial markets operate which, ultimately, will benefit consumers and everyone involved in the manufacture and distribution of such products and services.
Our training messages need to reflect this opportunity and reinforce the positive impact that individuals working within the financial services sector can have in relation to retail financial markets.
Browse our comprehensive range of Consumer Duty courses and tutorials, including eLearning for front and back office staff, on-demand tutorials for compliance professionals, in-house courses and workshops for senior management and Consumer Duty champions.
About the Author
Michael has over 20 years’ experience in compliance learning, with particular expertise in developing innovative, blended learning solutions.
He started his career as a lawyer, advising on UK and international regulation. In 2005, he set up a global compliance training provider which developed online and classroom training for major financial groups, regulators and multi-national companies. As one of the lead subject matter experts, he delivered compliance training on a wide range of regulatory topics, including financial crime, market conduct, information security and conduct risk.
Michael has worked with regulators and industry bodies, including the FSA (now FCA), the JMLSG and the BSR/UN Global Compact, to develop training and awareness initiatives in relation to major legal and regulatory events. He is also the author of ‘Financial Services Regulation - A Practical Guide’ which was endorsed by Sir Callum McCarthy, former Chairman of the FSA.