The FCA’s Consumer Duty will help ensure that retail financial services firms’ promises match their actions. Firms that don’t behave and communicate authentically will face ever-increasing reputational challenges.
Financial services firms’ marketing is full of phrases like ‘great customer service’ and ‘competitive interest rates’. But when I phone my car insurer the call wait time is more than 10 minutes. When I do finally speak to them, they promise to call me back but never do.
It isn’t just customer service where the claims often don’t match the reality. My savings account is currently paying me 0.16% AER, but the same building society is paying 1.5% AER on a similar account. Why didn’t it tell me about the new product? Or move me to it automatically?
Putting customers at the heart of what you do is a central tenet of UK financial services regulation. The FCA’s Consumer Duty will double down on that requirement. It sets out a new Consumer Principle that requires firms to act to deliver good outcomes for retail customers, and it defines four areas for those outcomes:
- Products and services – should be properly designed to meet the needs of all customers including, of course, customers who have a vulnerability or protected characteristics. This will be a real challenge for providers whose websites, online services and apps are not fully accessible by design, for example.
- Price and value – consumers pay a price for products and services that represent fair value and poor value products and services are removed. So, for example, will my building society be able to offer two identical savings accounts where one pays an interest rate that is 10x higher than the other?
- Consumer understanding – this will require firms to ensure that they’ve communicated well about how their products and services work. An example given by the FCA is not ‘hiding’ important product information in the T&Cs that realistically customers won’t read.
- Consumer support – this is focused on customer service, to ensure that it’s easy for customers to access the help they want at all stages of the product journey, including if they want to switch products or providers. There will be no justification for answering calls from new customers quicker than those from existing customers, for example, as many providers do today.
Crucially, firms will have to demonstrate, with data, that they are really doing what they promise and will have to produce an annual report for their Board that sets out their compliance.
Our own work on authenticity shows that in the UK financial services firms are already struggling to meet expectations on value and the customer experience. The Consumer Duty will expose firms that over-promise and under-deliver – and their reputations will suffer as a result.
Although the Consumer Duty doesn’t come into force until July 2023, many firms will find they have a huge amount of work to do over the next 12 months. The first phase – which our Talent & Transformation team can support clients with – is internally focused on cultural and behavioural change. New products, processes, or customer service practices require shifts in mindset, ways of working, capabilities and behaviours; these elements take time to change, build and strengthen, particularly if existing practices are part of the existing fabric. Alongside this, of course, we’ll be supporting our financial services clients on how to evolve and shape their external narrative to close the authenticity gap and make sure that what is promised to customers matches up to their experience.
Ian Williams, director, Financial Services and Corporate
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August 8, 2022