Deloitte's IMW Consumer Duty Survey: The Results Are In

At a glance:

Deloitte surveyed firms in the Investment Management and Wealth (IMW) sector to understand how Consumer Duty has impacted their business. The survey results indicate how a cross section of firms in the IMW sector are managing the effects of this regulatory and cultural change.

Survey Findings

Overall, our survey results show that most firms are confident that they implemented Consumer Duty to a sufficient standard across all areas of their business by the go-live date of 31 July 2023. However, there is broad recognition across the sector that there is still more to do. As an example, 91% of firms stated that their next focus area for Consumer Duty is the development of management information for monitoring and reporting purposes.

The effort spent by firms on implementing the Duty should result in them being able to see potential benefits emerge over time not just for their customers but for their firm. Data will be key to measuring these benefits, and it is important Boards recognise this in the context of reviewing Principle 12 reports. Keeping the knowledge gained through consumer duty implementation fresh, will help accelerate future change.

Ranking the four Consumer Duty Outcomes by the level of challenge they posed to firms during implementation.

1. Price and Value is the outcome firms ranked as the biggest challenge to implementation efforts despite many firms adopting COLL equivalence. A common message relayed by survey respondents who are distributors in the wealth management space is that there are difficulties in applying the requirements and obtaining data from third party manufacturers. Others reported challenges applying value assessments to pricing models where there is the ability to discount and the reliance on offshore providers was also cited as a factor that causes difficulties.

2. Products and Services was the second most challenging outcome to implement due to the lack of availability of customer information required to demonstrate distribution to the target market. Our results show that most firms adopted PRIN in respect to Products and Services requirements, rather than relying on existing PROD requirements. 66% of firms who opted for the PROD equivalent standards reported that they have made additional enhancements.

3. Consumer Understanding came third due to firms experiencing challenges with pre-prescribed regulatory disclosures being less retail friendly than expected. Our survey results show massive variation in the volume and types of communications tested by firms pre-July 2023. Amongst the population surveyed, the most commonly tested communications were cost and charges disclosures, product literature, and websites.

4. Customer Support was ranked as the least challenging outcome to implement with the level of uplift in customer support frameworks appearing to be mixed across the sector based on the survey feedback received. Some respondents reported minimal amendments to existing frameworks whereas others reported fundamental changes. The volume of possible journeys, and combinations thereof, during the life of a customer's relationship with the firm lead to some firms struggling to determine “where to draw the line” with customer support.

The top three positive impacts of the Duty

Firms commented that the following were perceived to be making the biggest beneficial impact to customer outcomes:

1. The targeted focus on improving customer understanding and customer support is seen by firms as a way for the industry to address historical criticism for providing a large volume of overcomplicated information to customers.

2. Improvements in communications between manufacturers and distributors is expected to help ensure that products sold to retail customers are suitable and appropriate.

3. The approach of dedicating efforts to individual outcomes allows firms a degree of flexibility when actioning the requirements in ways that can benefit their customers.

An indication of some unintended consequences

We also asked firms whether they believed that the Duty had resulted in any unintended consequences. They commented that:

• A lack of standardised information sharing templates and a number of different information sharing solution offerings from third parties is resulting in resourcing challenges for firms putting in place arrangements to manage different reporting requirements.
• Some firms raised the risk that firms are unlikely to share reports that say their product is not providing fair value, fearing that consequential actions would be taken by distributors resulting in outflows and an increased number of fund suspensions.
• The continued pressure on demonstrating 'value' could disproportionately affect smaller firms who may find it difficult to compete in terms of value because of their scale.
• The sheer volume of data being generated by all areas covered by Consumer Duty requirements may mean that the data relating to good customer outcomes is 'lost' or not as visible within the data set.

Next on the list

Although firms breathed a sigh of relief for “getting over the line” on 31 July, it was only a fleeting sense of calm. There is still a lot to do to embed the Duty and, in particular, to identify and refine data and outcomes monitoring capabilities. Our survey showed that IMW sector firms also have a plethora of regulatory change initiatives on the horizon, with 68% noting that a priority focus is on Sustainability/ESG, and a further 45% noting DORA as their priority focus area.

Curious to know more?

If this summary has piqued your curiosity and you would like to take a closer look at our findings, then please download our detailed survey findings report.

Our Consumer Duty Lead Paul Fraser is also on hand if you have any questions or would like more bespoke support.