New year, new regulation

Hailed as the UK’s most significant regulatory update in a decade, Consumer Duty has had firms working hard to realign their business models since long before its implementation date. How have they managed so far?

The FCA released a string of publications at the tail end of last year, bringing firms some eagerly awaited clarity on Consumer Duty, including a review of the first board reports since the act came into force.

While the majority of the insights aren’t too surprising, the three publications provide some clear guidance on what to expect from the regulators in 2025.

The first-of-their-kind reports (published in response to industry feedback) spotlight best practices and key areas of improvement across:

The Broadgate team delve into the findings below in more detail, exploring what they might mean for tomorrow’s labour market.

Focus Areas for Consumer Duty

The FCA intends to use Consumer Duty to simplify its broader requirements and emphasise its transformative regulatory approach to improving customer outcomes.

It’s a move that, in part, aims to facilitate the UK’s international competitiveness, an area in which the FCA has faced substantial criticism in the past.

Interestingly, wealth managers find themselves in the spotlight, as the FCA focuses on: ‘Tackling poor identification of clients with characteristics of vulnerability by wealth managers.’

This mirrors the recent uptick in demand for candidates with vulnerable client expertise, highlighting the increasing pressure on wealth managers and advisors who demonstrate both regulatory compliance and a granular understanding of the nuances surrounding vulnerable customers.

Consumer Duty applies to the full customer lifecycle, an area in which a common theme emerged across all three publications: Data quality.

Data-savvy interim compliance talent is, understandably, a focal point for hiring managers, and we expect this to continue as operational resilience remains a top priority in navigating the regulatory cultural shift.

The FCA names four focus areas for consumer duty in 2025:

  1. Embedding the Duty and Raising Standards
  2. Enhancing Understanding of the Price and Value Outcome
  3. Sector Specific Priorities
  4. Realising the Benefits of the Consumer Duty

Sector-specific outcomes are highlighted in the publication, a timely inclusion given the recent scrutiny around flawed pension models – the FCA recently sought to ban and fire two individuals for operating a flawed advice model after estimating the bad advice cost clients around £2 million.

This, combined with the recent claims that some firms risk severe action from the FCA by mishandling GDPR for non-compliance with Consumer Duty, reiterates the regulators sharpened stance on holding firms accountable.

Leaders should prepare by targeting compliance talent with strong data governance experience. Strategically, this means investing in cross-functional teams that focus on client-centric outcomes.

Thankfully, the growing pool of interim talent offers a flexible solution for those struggling to wade through the tumult of today’s labour market.

Complaints and Root Cause Analysis

The FCA conducted a complaints and root cause analysis of 40 in-scope firms ‘across a range of sectors,’ identifying best practices and key areas of improvement. Again, data emerged as a frontrunner:

  1. Analysing Data for Different Customer Types
  2. Taking Action Based on These Insights
  3. Assessing and Measuring the Impact of These Actions

Notably, the FCA found that ‘some issues are not being properly identified, especially where firms have diverse target markets for their products.’

Workforce diversification has long been known as a solution for firms attempting to tailor products to a culturally nuanced customer base. Hiring managers must not underestimate the value of hiring for cultural competence at a time when DEI (diversity, equity, and inclusion) is becoming increasingly polarised.

The FCA notes that many firms who have been successful in reaching Consumer Duty outcomes have developed dashboards to link their management information back to consumer duty (including complaint volumes, quality assurance, and characteristics of vulnerability outcomes).

This underscores the impact of the tech/compliance convergence. We’re likely to see the RegTech space explode in the next few years – hiring managers will need to adapt their recruitment focus accordingly.

We can expect this to involve an increase in the amalgamation of tech skills and compliance expertise, as seen over in the credit risk space, where candidates with coding skills (SQL, Python etc.) are a prime target.

Consumer Duty Board Reports

At last, the review of the Consumer Duty board reports is live. The publication is an assessment of 180 firms across the retail banking, wholesale, insurance, payments, consumer investments and consumer finance sectors.

The inaugural publication spotlights five areas of improvement:

  • Data Quality
  • Comprehensive View Across Distribution Chains
  • Analysis of Different Customer Types
  • Challenge from the Board
  • Taking Effective Action

 

And five aspects of good reports:

  • Clear Outcomes Focus
  • Good Quality Data
  • Analysis of Different Customer Types
  • Clear Processes for Production of the Report
  • A Focus on Culture Throughout the Firm

 

The cultural focus is critical for firms adapting to a new era of compliance. This is a major focal point for boards, and it’s something we’ve seen repeatedly when conducting executive searches for our clients.

Moreover, the demand for INEDs (Independent Non-Executive Directors) with experience in consumer protection and regulation is increasing alongside the growing complexity of corporate governance, partly driven by the ongoing developments in Consumer Duty.

With data quality emerging as a strong thread throughout the regulator’s current narrative (which we don’t expect to change too much), firms will need to target leadership talent that can navigate the operational implications of data governance. As the FCA notes:

‘Some firms did not have sufficient data quality to justify conclusions or to give governing bodies adequate assurance that firms are meeting their obligations under the Duty. Some also did not accompany their MI with adequate explanations to clearly illustrate it constitutes evidence of good outcomes for customers.’

Often, we find that one of the biggest hurdles to tech implementation is still a lack of understanding at the board level, especially when it comes to the integration of data-hungry systems like AI-enabled tech.

Bridging these divides will prove essential in the year ahead, and advisors are well-positioned to make an impact.

Interim Recruitment Support

Operational agility will be the key to meaningful growth 2025, provided firms can maintain compliance in a fast-moving landscape. It’s clear that Consumer Duty is a primary focus for the regulator, and we can expect more changes as the FCA continues to test higher standards.

Consumer Duty, while expanding the compliance burden, will ultimately provide firms with a strategic advantage. Now is a time to be a bar raiser (the main objective of the Consumer Duty), and it all starts with making sure you’ve got the right people onboard.

Contract recruitment is an adaptable, scalable solution. Here at Broadgate, our contract division has had the pleasure of helping firms scale high-performing teams across the UK since 2015. We’ve seen the hiring markets across investment, insurance, and banking grow ever more complex – evolving alongside it is essential.

Looking for Legal, Compliance, and Financial Crime recruitment services? We've got you covered. 

Contact Dan Tapsell for support on all things compliance talent: [email protected].