Evolving retail conduct risks

Changing investor demands and behaviours, the need to finance economic recovery, increasing digitalisation and the move to hybrid working models are giving rise to new or heightened retail conduct risks. These risks should be identified, mitigated and managed effectively by financial services firms to ensure delivery of good customer outcomes.

Regulators are attuned to both the benefits and evolving risks to consumers of new products, distribution models and marketing methods. Firms should review their overall culture and their treatment of both customers and staff. Firms should also review their products and services to ensure they are fit for purpose and do not over-promise on environmental and social issues.

• The COVID-19 pandemic has led to significant - and potentially permanent - shifts in consumers' financial circumstances and lifestyles. Digital expectations and demands for sustainable finance have accelerated, bringing new risks such as "greenwashing".
• Policymakers are seeking to encourage individuals to move from savings to investments, and are reducing current investment restrictions for sophisticated retail investors. These actions could herald new risks to consumers.
• The pandemic has provided added impetus to policymakers' plans to encourage moves towards digital finance and the widening use of technology, but regulators are attuned to both the benefits and the new and evolving risks to consumers. They are concerned about firms' digital resilience, governance and culture, product and service value, and treatment of customers, especially the vulnerable.
• Governance arrangements, controls and resilience should be reinforced and enhanced for the new reality of increased digitalisation, hybrid working and evolving consumer demands. The challenge is whether firms' pre-pandemic structures and behaviours can and should continue unchanged. Regulators and customers expect firms to ask themselves not “Can we?” but “Should we?”.