Beyond performance: A view on why financial services firms must reframe training, competence, and workforce assurance in a Consumer Duty era
Introduction
The regulatory landscape for financial services firms is undergoing a profound shift. The introduction and continued embedding of Consumer Duty, alongside evolving expectations under the Senior Managers & Certification Regime (SM&CR) and an increasing emphasis on conduct and culture, signal a move away from prescriptive, rules-based compliance toward a more outcomes-driven model. At the centre of this transition lies a critical and uncomfortable truth: firms are now expected to demonstrate not just that their employees follow processes, but that they consistently exercise good judgement in delivering fair outcomes for customers.
This shift exposes a structural weakness in many firms’ operating models – namely, an over-reliance on traditional performance management frameworks as proxies for competence and control. While performance management has long served as the primary mechanism for assessing employee effectiveness, it was never designed to evidence regulatory competence, behavioural integrity, or customer-centric decision-making. As regulatory expectations evolve, this misalignment is becoming increasingly untenable.
Firms must be able to evidence that their people are consistently capable of making good decisions and delivering fair outcomes for customers.
In this context, firms must reconsider the role of Training and Competence (T&C) frameworks. No longer a compliance formality or point of validation in a periodic certification exercise, T&C must evolve into a dynamic, evidence-based system of workforce assurance – capable of assessing judgement, identifying emerging risks, and providing Senior Managers with defensible comfort that their people are equipped to deliver good outcomes right across all consumer journeys.
The limitations of traditional performance management
Traditional performance management frameworks are, by design, backward-looking. They assess past performance against predefined objectives – typically focused on financial targets, productivity metrics, or operational efficiency. While these measures are valuable for commercial management, they are poorly suited to capturing the quality of customer outcomes or the integrity of decision-making.
A fundamental issue is that performance metrics often prioritise volume over value. Sales targets, call handling times, and throughput measures can inadvertently incentivise behaviours that are misaligned with customer interests for example. An employee may meet or exceed their targets while simultaneously exposing customers to harm – through inadequate disclosures, poor advice, or failure to recognise vulnerability. In such cases, the performance framework may signal success where the regulator would see failure.
Moreover, performance management lacks the granularity required to assess judgement. It rarely captures how decisions are made, what alternatives were considered, or whether the employee appropriately balanced competing risks. In a regulatory environment where judgement is becoming a first-class expectation, this represents a critical blind spot.
The episodic nature of performance reviews further compounds the problem. Annual or quarterly assessments are too infrequent to detect emerging risks in real time.
Perhaps most importantly, performance management frameworks are not designed to provide auditable evidence of regulatory compliance. They support HR decisions – such as promotion, remuneration, and disciplinary action – but they do not typically generate the kind of structured, decision-focused evidence required to demonstrate “reasonable steps” under SM&CR or to satisfy supervisory scrutiny.
The rising importance of the “competent employee”
As regulatory expectations evolve, there is a growing emphasis and refocus on the concept of the “competent employee.” As you will no doubt recognise, this is not a new idea, but its interpretation is changing. Competence is no longer defined solely by qualifications, technical knowledge, or experience. Instead, it encompasses the ability to consistently deliver good customer outcomes, particularly in situations where rules are ambiguous or incomplete.
This raises the bar significantly for firms. Performance can no longer be used as a proxy for competence. As already discussed, high-performing employees may still pose significant risks if their success is achieved through behaviours that undermine customer outcomes. Regulators are increasingly likely to challenge firms on this point, asking not whether employees are successful, but whether they are safe and reliable in their decision-making.
A greater emphasis on competence also implies a need for earlier and more proactive intervention. Firms can no longer wait for complaints, breaches, or poor performance ratings to identify issues. They must develop mechanisms to detect weaknesses in judgement and behaviour before they result in harm.
As regulatory expectations evolve, there is a growing emphasis and refocus on the concept of the “competent employee.”
This creates a clear requirement for more sophisticated and responsive workforce assurance frameworks – capable of assessing not just what employees do, but how and why they do it.
Why Training & Competence must take centre stage
In this evolving landscape, Training & Competence frameworks are uniquely positioned to fill the gap left by traditional performance management. However, to do so effectively, they must be fundamentally reimagined.
One of the most important contributions of a modern T&C framework is its ability to assess judgement. Through techniques such as scenario-based assessments, case reviews, and observed interactions, firms can evaluate how employees respond to complex, ambiguous situations. This allows judgement to be observed, tested, and evidenced – rather than assumed.
T&C frameworks also support continuous assurance. By incorporating real-time quality assurance, live supervision, and ongoing assessment, they enable firms to monitor competence on an ongoing basis. This is critical in a Consumer Duty environment, where risks can emerge and evolve rapidly.
Importantly, T&C generates auditable evidence. Assessment records, competence decisions, and remediation actions can all be documented and linked to specific roles, risks, and outcomes. This provides a robust evidential base for demonstrating compliance with regulatory expectations, including the “reasonable steps” requirement for Senior Managers.
Bridging the gap between behaviour and outcomes
One of the key challenges for firms is establishing a clear link between employee behaviour and customer outcomes. Without this linkage, it is difficult to assess whether competence frameworks are effective or to identify the root causes of poor outcomes.
A well-designed T&C framework can help bridge this gap by integrating multiple data sources. Complaints data, quality assurance results, conduct breaches, and customer feedback can all be analysed alongside competence assessments to provide a more holistic view of performance and risk.
This integration enables firms to identify patterns and trends that may not be visible through traditional performance metrics. For example, a team may consistently meet its targets but exhibit higher-than-average complaint rates or lower-quality outcomes in specific scenarios. By linking these insights to competence assessments, firms can identify underlying capability gaps and target interventions more effectively.
AI for monitoring competence, conduct and culture
Aligned with the strategic goals of most firms to maximise the benefits of AI, I feel the need to highlight both the potential and the inherent limitations of this technology when it comes to monitoring competence, conduct and culture, in a meaningful way.
Artificial intelligence is likely to play an increasingly important role in supporting firms’ oversight of competence, conduct, and culture, particularly through its ability to analyse large volumes of data at scale. AI tools can identify patterns across customer interactions, flag anomalies in decision-making, monitor communications for potential conduct risks, and surface early warning indicators that may not be visible through traditional management information. This has clear value in a Consumer Duty context, where firms are expected to take a more proactive and data-led approach to identifying potential harm. However, AI is not a complete solution.
While AI can help highlight trends and outliers, it is far less effective at interpreting the emotional context, nuance, and intent that often underpin human behaviour – especially in complex or sensitive customer interactions. Judgement, empathy, and ethical decision-making remain inherently human capabilities, and many of the most important indicators of good (or poor) outcomes sit in these subtleties. As a result, AI should be seen as an enabling tool within a broader framework of human oversight, structured assessment, and managerial judgement, rather than a substitute for them.
What does good look like?
One of the more difficult challenges firms face when designing or enhancing a Training & Competence framework is defining the specific behaviours that underpin good decision-making – particularly where there is no universally agreed or internally consistent definition of what “good consumer outcomes” means in practise.
From my own interactions with firms across all sectors of financial services, it seems many have yet to fully articulate and embed what good customer outcomes mean in practice, including the task of implanting definitions and impacts onto their individual business models. In practice, this is often evident through firms defaulting to generic behavioural statements – such as “act in the customer’s best interests” or “communicate clearly” – which, while directionally correct, lack the precision needed to guide real-world decisions or support robust assessment.
This ambiguity creates a risk that competence frameworks become either overly subjective or overly process-driven, neither of which effectively captures judgement. To address this, firms need to invest time into fully articulating outcome-based behavioural standards grounded in real customer journeys, including examples of both good and poor practice. Without this clarity, T&C schemes will struggle to consistently assess capability, and Senior Managers may find it difficult to evidence that their workforce is equipped to deliver the outcomes that really benefit the business, and which regulators now expect.
Supporting senior manager accountability
For Senior Managers, the evolution of T&C is not just desirable – it is essential. Under SM&CR, Senior Managers are required to demonstrate that they have taken reasonable steps to ensure that their areas of responsibility are effectively controlled and that customers are treated fairly.
This requires more than high-level assurances or policy compliance. Senior Managers really do need access to detailed, reliable, and timely information about the competence and behaviour of their workforce. They need to understand where risks are emerging, how effectively they are being managed, and whether interventions are delivering the desired outcomes.
A robust and transparent T&C framework can provide this level of insight. By generating structured, role-specific data on competence and decision-making, it enables Senior Managers to build a defensible narrative around workforce capability. It also supports more effective challenge and oversight, allowing Senior Managers to interrogate not just what is happening, but also why – including the ability to track, measure and judge the impact of interventions and corrective actions.
Crucially, T&C outputs can be mapped directly to Senior Manager responsibilities and the consumer journey. This ensures that accountability is aligned with risk and unlocks a clear line of sight for Senior Managers – their obligations and right across the breadth of behaviours and outcomes they are expected to oversee.
Practical implications for firms
To realise the full value of T&C, firms will need to make a number of practical changes.
First, they should shift key decisions around role suitability and certification into formal T&C governance processes. Questions such as whether an employee is competent to perform a role, handle vulnerable customers, or exercise specific authorities should be determined through structured competence assessments, rather than performance reviews.
Second, firms should integrate performance and competence data to identify hidden risks. High-performing employees should be subject to the same level of scrutiny as others, particularly where there are indicators of potential harm.
Third, firms should redefine what “good performance” looks like, incorporating measures of outcome quality, decision-making behaviour, and customer impact. This helps to align incentives with regulatory expectations and reinforces the importance of doing the right thing.
Fourth, governance and escalation processes should be strengthened to ensure that competence issues are identified and addressed promptly. This includes clear triggers for reassessment, enhanced supervision, and, where necessary, role restrictions.
Finally, Senior Managers should be provided with enhanced visibility of competence and behaviour through tailored MI and dashboards. This is essential for effective oversight and for demonstrating compliance with regulatory expectations.
Conclusion
The shift toward an outcomes-based regulatory model represents a fundamental change in how financial services firms must think about their workforce. It is no longer sufficient to demonstrate that employees are qualified, trained, or high-performing. Firms must be able to evidence that their people are consistently capable of making good decisions and delivering fair outcomes for customers.
Traditional performance management frameworks – and maybe even overly process dependant legacy T&C frameworks – are not equipped to meet this challenge. They are too backward-looking, too focused on metrics, and too disconnected from the realities of customer risk and regulatory scrutiny.
In contrast, a robust and well-designed contemporary Training & Competence framework offers a viable path forward. By focusing on judgement, enabling continuous assurance, and generating auditable evidence, T&C can bridge the gap between policy and practice, behaviour and outcomes, and assurance and accountability.
For firms that embrace this shift, the benefits extend beyond regulatory compliance. A stronger focus on competence and judgement can drive better customer outcomes, enhance organisational resilience, and build greater confidence among regulators, Senior Managers, and customers alike.
In the months and years ahead, the question for firms will not be whether they have a T&C framework, but whether that framework is capable of answering the most important question of all: can we trust our people to do the right thing when it matters most?
