Omni-CBR 101: What FSPs should know

Anri Dippenaar, Masthead Head of Compliance, and Lisa Teixeira, Masthead Compliance Specialist 

Omni-CBR (Conduct of Business Return), the new off-site monitoring tool being introduced by the Financial Sector Conduct Authority (FSCA), will transform the way Financial Service Providers (FSPs) report and comply with regulatory standards.  

This article delves into the essentials of Omni-CBR, its implications for FSPs and how advancing Treating Customers Fairly (TCF) in the financial services industry is at the heart of its purpose.  

Omni-CBR in a nutshell 

According to a 2022 communication by FSCA, to fulfil its mandate, the Regulator requires a robust off-site monitoring tool that will allow it to access meaningful, reliable, measurable and comparable information on key conduct indicators.  

Enter Omni-CBR: a business conduct report that financial institutions will have to submit to the FSCA. It sets out the conduct indicators that financial institutions – FSPs, banks, insurers, investment providers, co-operative financial institutions (CFIs), retirement funds and retirement fund benefit administrators – will report on. The most recent Omni-CBR draft states that these reports must be submitted to the FSCA every quarter. (At the time of writing, an updated Omni-CBR draft is expected in July 2024.) 

Why does the FSCA want a new reporting system? 

One of the main objectives of Omni-CBR is to assess and encourage the delivery of TCF outcomes across the financial sector. Past reporting methods fell short in truly reflecting TCF. While FSPs could technically comply with regulations through these reports, their actual practices sometimes failed to prioritise TCF. With Omni-CBR, the FSCA wants FSPs to evidence fair customer outcomes using the data. 

Moreover, the FSCA hopes it will optimise their resource allocation. Currently, their FSP audits follow a set schedule or react to media coverage, complaints or reported misconduct. Going forward, the FSCA’s systems will be capable of analysing Omni-CBR (business) data, enabling them to swiftly identify industry outliers. Omni-CBR data also allows the grouping of similar FSPs, offering a comprehensive and data-driven industry perspective. For example, it can promptly flag an FSP with a notably higher cancellation rate than its counterparts. This approach allows the FSCA to prioritise resources towards potential bad apples in the industry. 

This new reporting approach will also empower the FSCA to validate data quickly and efficiently. They will be able to compare the information they receive in an FSP’s Omni-CBR report with what they received from product providers. 

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What will Omni-CBR mean for FSPs in practice? 

In a nutshell, FSPs will be required to collect and report more detailed information on their clients and conduct indicators. 

Here is a practical example: With previous reports, FSPs didn’t have to provide further detail if they indicated they had no conflicts of interest. Omni-CBR demands greater granularity, asking for details on the FSP’s affiliated parties, the nature of relationships, financial arrangements and marketing associations.  

This deeper insight allows the FSCA to independently evaluate potential conflicts of interest, moving beyond simplistic “yes” or “no” responses from FSPs. 

What are the potential pitfalls for FSPs? 

One of the primary challenges FSPs face with Omni-CBR is data management. Not only do FSPs need to report more detailed data, but they also need to ensure accurate collection of the right type of data. This presents a twofold challenge: firstly, recording the necessary Omni-CBR data, and secondly, effectively using and translating this data into evidence that showcases their commitment to TCF outcomes. 

Additionally, adapting to a new reporting framework may initially increase administrative burdens and require adjustments to existing compliance strategies. 

Tips on how to prepare 

Preparing in advance will ensure a smooth transition when Omni-CBR comes into effect. Delaying preparations can result in production halts as FSPs scramble to meet the data collection requirements.  

Here is how you can prepare: 

• Understanding your conduct and outcomes indicator data: Begin by thoroughly reviewing and comprehending the conduct and outcomes indicators relevant to your business. This involves understanding the specific data points required and how they reflect your organisation’s TCF performance. Use the current draft Omni-CBR report (an updated version is expected in July) to anticipate the data requirements applicable to your business.  

• Updating your data collection and storage methods: FSPs will need to submit larger volumes of data more frequently. To do this, you’ll need an efficient system in place to collect, organise and retrieve information seamlessly, whether this is through a basic Excel spreadsheet, a sophisticated database or an advanced customer management platform. Testing different data collection and storage methods now also means that you can pick up issues with your systems, and find ways to fix them, before Omni-CBR is implemented. 

• Segmenting clients effectively: FSPs will be expected to submit detailed client data. To prepare, FSPs can start segmenting their clients based on various criteria, such as age, race, gender, the types and quantity of products held by each person, etc. 

• Conducting root-cause analyses: Engage in root-cause analyses to identify any systemic issues or areas of concern. By proactively addressing these issues, you can mitigate risks and ensure a smoother transition to the new reporting system.  

• Reevaluating your business: It’s common for business owners to get caught up in the day-to-day operations, leaving little time to step back and assess the bigger picture. The introduction of Omni-CBR, along with the Conduct of Financial Institutions (COFI) Bill, presents a valuable opportunity to reassess your business. Consider whether your strategic goals still align with your current operational practices. For instance, are you still targeting the same types of clients as you were a couple of years ago? This can significantly impact the way you provide advice and ultimately affect your TCF outcomes.  

The potential benefits for FSPs 

Undoubtedly, transitioning to Omni-CBR will initially increase the administrative burden for FSPs, and adapting to this new system may pose challenges. However, with careful preparation, FSPs can navigate this change smoothly – and even benefit from it. 

FSPs that can reframe their perception of Omni-CBR from a mere administrative task to a powerful business development tool stand to gain. If they can effectively use the information in their reports to enhance their operations and improve customer outcomes, they’ll boost business profitability. 

Omni-CBR reports can illuminate underlying issues within your business – issues that may have gone unnoticed or only surfaced when it was too late. For instance, a high cancellation rate may seem like a standalone problem, but with Omni-CBR, identifying a specific Representative’s involvement sheds light on potential root causes, such as inadequate explanation of benefits or misaligned product offerings. 

Moreover, early detection of issues that impact TCF Outcomes and swift remedial actions enhance customer satisfaction and retention and contribute to the long-term profitability and sustainability of the business. 

Embracing the future with Omni-CBR 

Omni-CBR marks a pivotal shift in how FSPs report and adhere to regulatory standards. While the transition may pose initial challenges, the benefits of embracing Omni-CBR are significant, paving the way for a more transparent, compliant and customer-centric financial industry. 

This new reporting method, with its focus on TCF, also blurs the line between compliance and business activities. Traditionally, these two aspects were seen as separate. However, with TCF at the heart of Omni-CBR (and COFI), good compliance practices that promote positive consumer outcomes become an integral part of practice management and business development.  

By embracing this new reporting tool and proactively preparing for its implementation, FSPs can navigate the evolving regulatory landscape with confidence and efficiency.