As part of its mandate to protect investors, Section ‘PRIN 2A.3 Retail Customer Outcome – Products and Services’ of the Financial Conduct Authority’s (FCA) Consumer Duty requires distributors to provide information to manufacturers with the aim of assisting them with their product review processes.

The first reporting period ended in March of this year and marked the beginning of the requirement for distributors to provide feedback to manufacturers. This included extensive data points, such as sales information, details about cancellations and updates covering the regular reviews of their own distribution arrangements.

So, how are distributors handling these new provisions?

Although Consumer Duty is a positive piece of regulation, the rules have caused problems for distributors, and this is having a cascade effect on manufacturers.

While manufacturers have plenty of experience sharing product information with distributors, i.e. via the European MiFID Template (EMT) or European ESG Template (EET), the flow of data in the opposite direction is not as embedded.

A lack of data harmonisation

Data consistency – or lack thereof – is a source of frustration for many manufacturers, despite industry efforts to achieve better harmonisation.

The root cause of this issue is largely regulatory. Ahead of the rules taking effect, the FCA confirmed it was the industry’s responsibility to develop the standards underpinning the exchange of data between distributors and manufacturers, as required under Consumer Duty.

Although the Joint Trade Association, a collection of industry bodies representing manufacturers and distributors alike, has done an excellent job producing a comprehensive data standard in the form of the Distributor Feedback Template (DFT), adoption levels by distributors have been quite varied.

As a result, some manufacturers complain that certain distributors are providing them with information in different formats, making benchmarking incredibly difficult.

Tight time-frames

A number of distributors also noted that the time-frames for compliance were tight, meaning some firms had not gathered all of the required information before the deadline.

Building the systems and infrastructure to report the information was also mired with complexity, as not all distributors had budgeted for this work to be done in 2023 to 2024. This was in part due to some ambiguity around whether distributors are in scope to provide the data, and if existing shared information covers the new requirements.

These new rules come at a time when many financial firms, including distributors, are facing mounting cost pressures.

Even those organisations which did successfully develop solutions did not always have enough time to test their systems properly, which may have contributed to some of the initial data quality issues from the first reporting period.

Consequentially, a lot of manufacturers are struggling to reconcile the data from their distributors.

Getting to grips with the rules has not been easy for the industry, but there are options available, particularly for manufacturers.

Collecting data from multiple distributors is not always straightforward, which is why third parties such as Broadridge have launched tools to help manufacturers gather and validate timely data in a DFT format.

By delegating the data collection and consolidation processes to third parties, firms will not only improve their compliance processes, but could also benefit from operational savings, meaning resources can be freed up and redeployed towards more revenue generating activities.

And finally, access to highly customised third-party reports and detailed analytics will give manufacturers invaluable insights into their sales and distribution processes, allowing for products to be refined accordingly.

While Consumer Duty preparations have been tough at times, the good news is that those organisations who are both leveraging the DFT effectively and making sense of the data they receive, are obtaining genuinely useful analytics from it.

These insights are then feeding into product reviews and boardroom discussions.

With the next wave of reports due after the end of September, distributors, together with their platform technology providers, are busy working on additional solutions to ensure information is relayed to manufacturers as smoothly as possible.

If the industry keeps moving in the right direction and the FCA provides a bit more clarity about the DFT, then the reporting process should be fairly frictionless come 2025.

For more information on about Consumer Duty and Distributor Feedback you can read our insights:

Industry perceptions of the Distributor Feedback Template

Consumer Duty: The Approach to Distributor-to-Manufacturer Feedback

To discover how Broadridge is overcoming the operational challenges of Distributor Feedback please visit our webpage:

Distributor Feedback service for Consumer Duty