With its focus on encouraging firms to take a bolder and more dynamic approach to customer care, the Consumer Duty aims to increase the standard of protection and safeguarding given to consumers across financial services.
Beyond simply treating customers fairly, the FCA will now expect regulated businesses to take a more proactive role in helping customers reach their financial goals, envisioning a market where businesses ‘compete vigorously in the interests of consumers’.
Firms will therefore need to ensure consumers’ best interests and wellbeing are placed at the heart of each aspect of the business lifecycle – from the initial product development phase right through to how customer service interactions are handled on a day-to-day basis.
What does the Consumer Duty hope to achieve?
In many ways, a more forceful reboot of the existing ‘Treating Customers Fairly’ (TCF) guidance, the Consumer Duty will compel businesses to go beyond the current FCA handbook’s Principle 6 of ‘paying due regard’ to customers’ needs. And instead, it makes this the primary focus of all governance and decision making.
It’s hoped this shift in priorities will lead to tangible improvements in the customer’s experience, as well as help the regulator achieve a number of its broader, long-held goals for the industry, including:
- Raising and re-enforcing conduct standards
- Ensuring products and services are truly ‘fit for purpose’ and provide fair value
- Preventing customers from experiencing harm
- Driving an outcomes-focussed approach to helping customers
- Preventing sludge practices
- Empowering consumers to participate in financial markets confidently
- Supporting customers when navigating unfamiliar environments
- Continuing the push for positive culture change
- Championing Diversity & Inclusion within firms’ employee and customer bases
- Restoring consumer trust in the financial services industry
What are the FCA’s expectations for firms?
Despite its game-changing ambition and clear step up in regulatory expectations, the FCA has confirmed it won’t be taking a prescriptive approach to how the Consumer Duty rules should be implemented. Instead, firms will be able to decide how they can be best applied to their own business model.
However, the Cross Cutting Rules make it clear that businesses will be required to:
1. Act in good faith towards retail customers
2. Take reasonable steps to avoid causing foreseeable harm to retail customers
3. Take reasonable steps to enable and support retail customers to pursue their financial objectives
In preparation, businesses should take another look at their end-to-end customer journey and assess how it could be improved to better serve their needs. Start by putting yourself in the consumer’s shoes and ask the fundamental questions such as ‘do our products provide value for money?’, ‘are our communications clear, understandable and not misleading?’ and ‘as a customer, would I be happy to be treated in this manner?’
Beyond that, your internal governance processes will need reviewing to ensure they’re compliant with your new obligations. The same goes for your complaints handling procedures: for instance, do they genuinely go far enough to identify and address the root cause of adverse outcomes?
Start by putting yourself in the consumer’s shoes and ask the fundamental questions such as ‘do our products provide value for money?’, ‘are our communications clear, understandable and not misleading?’ and ‘as a customer, would I be happy to be treated in this manner?’
Indeed, it’s clear that the FCA is expecting firms to step up the amount of process and outcomes monitoring they conduct on an ongoing basis. Above all, the legislation will place the onus on businesses to be proactive in amending aspects of their business that yield unsatisfactory results for customers – whether it’s a specific product or service, ambiguous marketing messaging or inefficient communications channels.
And so, equipping yourself with the right tools to monitor, review and evidence customer interactions will invariably be a vital component of any successful Consumer Duty strategy.
Easing the compliance burden with next-generation RegTech
It’s no secret that implementing the Consumer Duty will require a lot of time and effort for even the most well-prepared business. And once the implementation phase has passed, staying on top of your obligations is likely to add a considerable strain to already-busy compliance teams.
That’s why firms are increasingly looking to the power of innovative technologies and RegTech to relieve the pressure. By leveraging AI, machine learning and smart automation, you can free up valuable human resources for where it’s truly needed, maintain a complete record of client interactions and benefit from an extra line of defence against human error.
With Recordsure’s market-leading speech and document analytics platforms, you can:
1. Ensure processes adherence and regulatory compliance
2. Catch emerging risks early
3. Keep an automatic audit trail
4. Futureproof your business activities
In preparation, businesses should take another look at their end-to-end customer journey and assess how it could be improved to better serve their needs. Start by putting yourself in the consumer’s shoes and ask the fundamental questions such as ‘do our products provide value for money?’, ‘are our communications clear, understandable and not misleading?’ and ‘as a customer, would I be happy to be treated in this manner?’
Beyond that, your internal governance processes will need reviewing to ensure they’re compliant with your new obligations. The same goes for your complaints handling procedures: for instance, do they genuinely go far enough to identify and address the root cause of adverse outcomes?
Indeed, it’s clear that the FCA is expecting firms to step up the amount of process and outcomes monitoring they conduct on an ongoing basis. Above all, the legislation will place the onus on businesses to be proactive in amending aspects of their business that yield unsatisfactory results for customers – whether it’s a specific product or service, ambiguous marketing messaging or inefficient communications channels.
And so, equipping yourself with the right tools to monitor, review and evidence customer interactions will invariably be a vital component of any successful Consumer Duty strategy.
Find out how RegTech can take your Consumer Duty plan to the next level.
