Pre-paid funeral planners: Welcome to the world of FCA regulation

From today the FCA will officially start to regulate those firms operating in the pre-paid funeral plan market who have successfully navigated the authorisation process. This is clearly an exciting day for these businesses who have been through a rigorous process to get to this point.

Unfortunately not all firms have made it through the process and many have decided to withdraw from the market completely. These firms are in the process of either transferring their existing books or winding down their businesses and there is some helpful information for customers on the FCA’s website.

What next then for the class of 2022?

Newly authorised firms have already been through the tough authorisations process and so may be tempted to take their foot off the pedal. In reality now is the time to actually step up a gear and make sure everything is working as it should.

Firms will no doubt have had to make some changes to their governance arrangements and risk management frameworks as part of the authorisations process and now is a great time to make sure they are working effectively. For example, by reviewing and assessing your suite of management information with a critical eye to think about whether it is actually telling you whether or not you are delivering the right outcomes for customers, have you actually defined what a good outcome looks like and are you undertaking root cause analysis?

Consumer Duty impact

As well as getting used to operating in the new environment, the sector also needs to plan for the implementation of Consumer Duty. In some ways pre-paid funeral providers and distributors have already had to get to grips with some aspects of the new Consumer Duty obligations because they have to comply with the product value requirements set out in the FCA Handbook. These are closely aligned with the Consumer Duty in relation to the fair value assessment, target market identification and product approval process. Compliance with the spirit and rule of the product governance requirements will put the sector in a good position on this front.

The Consumer Duty requirements are much wider though than just product governance. Firms should not assume that because they have just been authorised they don’t need to do anything in relation to Consumer Duty. As we all know, the new obligations are wide ranging and firms should ensure they have a plan in place to evidence implementation. In the new Policy Statement (PS 22/9) the FCA has said that firms’ boards should agree implementation plans by the end of October 2022 and ensure they have appropriate oversight of delivery.

Senior management engagement in this process is absolutely key. If you haven’t done it already, you should now be delivering training to your Board and senior managers to ensure they understand the extent of new changes, are engaged with the process and are in a position where they can make informed decisions. The implementation of Consumer Duty represents a real shift in the regulatory landscape and the senior people in the business may need to take some important decisions about the firm’s future strategy and direction.

Other business as usual activities

In addition to the major projects, firms also need to get on with day-to-day business. For example, this means taking account of the wealth of publications issued by the regulator including Portfolio and Dear CEO letters. We would always recommend that you read every letter even if it isn’t directly addressed to your sector because there is often good read across which can highlight the regulatory direction of travel.

Make sure you are also on top of current FCA initiatives. For example the regulator is very concerned about the impact of the cost of living crisis and has issued many different communications which set out its expectations for the way firms should behave. Closely linked is the treatment of vulnerable customers which also forms a key element of the Consumer Duty. Keeping up to date with FCA speeches and publications is a good way of keeping abreast of current regulatory thinking.

Lastly, don’t forget activities such as reporting and notifications. You will be required to submit returns using the FCA’s RegData system and it is worth logging on and having an explore if you haven’t already done so.

We wish all the newly authorised firms the best of luck for the future. We can help with all of the above points, and many other regulatory challenges. Please do not hesitate to get in touch if you would like any regulatory advice: contact@avyse.co.uk