One swallow doesn’t make a summer, so keep an eye on the forecast.
- Emma Jones
The following article has been written for the Chartered Banker Institute by Emma Jones, Head of Department, Retail Banking Directorate at the Financial Conduct Authority (FCA). Emma shares her reflections on the Consumer Duty, encouraging firms to take a ‘spring clean’ approach to ensure fair outcomes, continuous improvement, and ultimately, happier customers.
Spring is here, with promise of brighter and longer days. With fresh air finding its way into our homes it often leads to thoughts of taking a step back to dust the cobwebs and put heavy coats away in exchange for lighter alternatives. The classic spring clean has represented what we’ve seen firms do over the last couple of years, as the Consumer Duty came into effect. The FCA has also taken the opportunity to do its own ‘spring clean’ as we look to use the Duty to streamline our rules and reduce any regulatory clutter.
I’ve seen firms take a step back and reflect on their practices as they prepared for the rules. They’ve considered whether their end-to-end customer journeys meet customers’ needs and whether products are reaching their intended target market. They have looked at whether product information supports customers’ understanding, and whether the products themselves provide fair value. I’ve also seen firms gather data and evidence to monitor whether customers are getting good outcomes. This is not just a requirement of the Consumer Duty – it also helps firms to ensure they have satisfied customers able to reach their financial goals.
This of course extends to the treatment of customers in vulnerable circumstances who may need different support to other customers. This is a common thread which runs throughout the Consumer Duty. Different customers will need support with different products at different times. So, it is important to make it simple for customers to explain their needs, and for firms to understand the support requirements of customers in their target market. Being able to access information about customers throughout the customer journey to understand their individual needs is important to provide support that meets those customers’ needs. We talk about this in our publication on delivering good outcomes for customers in vulnerable circumstances.
But having a plan for interacting with customers in vulnerable circumstances doesn’t go far enough. We expect firms to be able to identify when particular groups of customers receive systematically poorer outcomes . This means collecting the data they need to identify these groups and monitoring outcomes. Firms can, for example, test these customer groups and see whether customers understand their communications. So, if a firm discovers, for example, through its monitoring and iterative testing of whether customers understand communications, that customers have suffered foreseeable harm as a result of its acts or omissions, it must take appropriate action to rectify the situation. A bit like a seasonal deep clean of a home, the Consumer Duty is not a once and done activity. It needs regular attention and must be fitting for the conditions ahead.
The Consumer Duty applies to everyone working for a firm. So, now the Duty is in force, how are you ensuring there is a culture of continual improvement? Training plays a key part in ensuring staff understand their responsibilities but it’s probably not the full answer. For example, challenge yourselves to think about how you are gathering feedback from all your stakeholders including third parties and distributors? How are leaders championing a speak-up culture and encouraging staff to feedback improvements but also celebrate successes? How do your staff surveys capture how staff feel about the role they play in delivering good outcomes for customers?
We have conducted our own call for input where we engaged with firms to hear thoughts about streamlining our rules and improve customer outcomes. Additionally, in our publication on good and poor practice areas for Consumer Duty Board Reports, we highlighted areas to think about, to make sure you’re doing the right monitoring of customer outcomes – so that Boards can consider the work that has been done and the priority next steps. Board reports should reflect robust discussions taking place across members. They should provide oversight of all the Consumer Duty outcomes, all products and services across the firm and via third party channels. Senior leaders in firms should satisfy themselves they have enough information to be confident on the consumer outcomes being achieved – as they would for business outcomes more generally.
I’m pleased to see the hard work many firms have put into implementing the Duty and reviewing customer outcomes and how it’s featuring in everyday discussions. But a bit like a clear out of winter clothes on the first day of sunshine, it’s worth monitoring the weather forecast and factoring in the views of those in our households that may still want a jacket to keep warm, before it is packed away. Spring cleaning activities from a year ago may offer good insights as to what has worked before - but it doesn’t always translate for what is foreseeable this year. A bit like keeping abreast of weather conditions, knowing what’s upcoming and closely monitoring your customers’ outcomes gives a stable platform to look forward to what’s ahead.
We are grateful to Emma and the FCA for providing us with this article. You can follow developments on the Consumer Duty at www.fca.org.uk/firms/consumer-duty. For those looking to deepen their understanding of the Consumer Duty, find out more about the Institute’s Consumer Duty Essentials programme here.