For regulated firms, much of the past two years has been spent preparing for the Consumer Duty but preparation was just the beginning. We are now nearly 8 months into the Consumer Duty regime and firms shouldn’t see the preparation and hard work they have done as a ‘box ticked’.
Outcomes
Firms will now have implemented the changes that Consumer Duty brought into place.
These include a new ‘Principle for Businesses’, Principle 12 which states that “a firm must act to deliver good outcomes for retail customers” alongside ‘Cross-Cutting Rules’ which are;
- Firms must act in good faith towards retail customers
- Firms must avoid foreseeable harm to retail customers
- Firms must enable and support retail customers to pursue their financial objectives
Principle 12 and the Cross-Cutting Rules are accompanied by the ‘Four Outcomes’. These Four Outcomes set the expectations for firm conduct in four particular areas and include;
- Products and Services
- Price and value
- Consumer Understanding
- Consumer Support
Monitoring
During preparations for the Consumer Duty implementation, firms will have evaluated their business to ensure that they meet the standards required and put in place any remedial measures. Once, the Consumer Duty standards have been reached, you need to monitor your consumer outcomes.
Firms must ensure that they have recorded their monitoring activity and appropriately review findings to ensure that they are reaching the right outcomes. Below we look at each outcome and how these might be monitored;
Products and Services
Products and services must have terms and features that match the needs of the consumers they’re created for. Firms can do this by undertaking regular checks such as;
- file Reviews
- customer feedback surveys
- consumer research
- product performance data
- complaints reviews
- Sales Performance Information reviews
Price and value
Firms must ensure that their products and services offer fair value. This means that firms must offer products or services at a fair price which reflects the benefits of those products and services and protect consumers from unreasonably high fees and charges.
Firms can assess whether their products and services offer fair value by taking steps to undertake monitoring such as;
- reviewing profitability and cost data
- reviewing associated fees and charges
- reviewing complaints data
- reviewing surveys and social media ratings
- reviewing distribution chain and market data
- reviewing sales performance information
- reviewing customer usage data
Consumer understanding
Ensuring that your customers are provided with the right information at the right time is vital to ensuring that they are equipped to make effective and informed decisions. Communication with consumers must be clear and transparent, appropriate for the average customer and potential customer vulnerabilities need to be considered. There are some keyways in which firms can ensure that they are achieving this outcome, these could include;
- undertaking surveys and mystery shopping
- undertaking independent reviews
- monitoring customer feedback
- reviewing customer queries data
- undertaking complaint reviews and root cause analysis
- reviewing product MI such as product take-up and cancellation rates
Consumer support
Firms must provide responsible and accessible consumer support. This includes processes which allow consumers to easily switch products and providers, cancel or make complaints. Firms need to take a flexible approach considering customer needs, removing any post-sale barriers and be responsive and accessible. Firms should undertake monitoring by way of;
- internal quality assurance
- customer retention data
- the speed of responses to customers
- call listening and feedback to employees
- of product cancellation rates
- complaint reviews and ensuring that the root cause analysis is identified and remedied.
- surveys and mystery shopping
It’s important not to look at the Consumer Duty as a one-off, isolated exercise. The Four Outcomes set a clear expectation from the FCA in how the Consumer Duty should be entrenched within and influence the way in which firms are run and how consumers can expect firms offering financial products and services to engage with them.
