Five red flags on Closed Product Consumer Duty programmes

May 2024

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.