Every transformative journey, no matter how well-intentioned and well-informed, has its blind spots. Recognising and addressing these is not just a necessity but a duty as the name Consumer Duty infers. Firms need to do this to not only meet their regulatory obligations but most importantly, to ensure consistently favourable customer outcomes.
As consultants, we’ve been meticulously examining a number of our client’s Consumer Duty Implementation Plans, checking that they can withstand regulatory scrutiny and, in the process, have identified areas that are commonly being overlooked or underestimated. Here are some of the blind spots we’ve identified:
Don’t overlook your prospective customers - Prospective customers are a segment that often falls into this oversight chasm. While much focus is accorded to existing clients, firms mustn’t forget that the Consumer Duty's ambit extends to potential consumers as well. So, when you chart your customer journey and gather feedback and insights along the way, don’t forget about those prospective clients. Why didn’t that prospective customer come back after that preliminary meeting? By focusing in on this demographic, firms can pre-emptively identify risks and opportunities, ensuring they're better equipped to serve and add value.
Communication is key - Communications have stood out as another significant blind spot. Communications come in many guises: from website content to product brochures. The real measure of effective communication isn't just in it’s dissemination, but in comprehension. Can all consumers, especially those with vulnerable characteristics, truly understand the messages being communicated? Ensuring clarity, accessibility, and comprehension is crucial. The concept of value versus cost presents another challenge for many firms. While the FCA underscores that fair value transcends pricing, firms grapple with this intricate balancing act and in particular, explaining it to their customers.
Feedback is gold – How you design your feedback mechanisms can illuminate many blind spots. Encouraging open dialogues over restrictive binary queries can yield deeper insights and understanding. Silence too is golden and understanding why a customer doesn’t want to engage can be equally enlightening. Instead of just offering checkbox options of a yes or no, why not open the dialogue further and encourage a more candid conversation. While the truth may be hard to digest, it’s instrumental in improving customer outcomes. Focus not just on data collection but on its utilisation as a driver of change. Also, don’t be shy. Share your findings, imperfections and all. The Duty is about restoring trust, and customers appreciate sincerity, especially when firms are eager to learn from their shortcomings.
Review time! - Don’t forget to update remuneration and performance management frameworks and don’t think that adding a line in staff performance reviews along the lines of ‘Has the employee considered the Duty and its implications’ is going to cut the mustard. What tangible evidence corroborates claims of mindfulness and compliance?
Training for a marathon – This isn’t a sprint; it’s a marathon. Reaching the 31st of July, intact but out of breath has been a huge undertaking for many firms and it has certainly kept us busy! But this is only the starting line, and the hard work has just begun, however do your teams know that? A one-size-fits-all training approach won’t hold up under FCA scrutiny. The FCA expects continuous monitoring and adaptation to new and emerging risks, all feeding back into refining policies, processes and ultimately, training. This ties back to one of the FCA’s 10 key questions: ‘Do individuals throughout your firm – including those in control and support functions – understand their role and responsibility in delivering the Duty?’
In summary, the Consumer Duty ushers in a new era of heightened consumer-centricity. It’s true success lies in unearthing and addressing those blind spots. Even if you think you‘ve got all of your bases covered, the path to compliance has its unexpected challenges. With vigilance, commitment, and a consumer-first mindset, these obstacles can become valuable insights and opportunities.
Should you need expert guidance or access to resources, like our Consumer Duty Checklist, reach out to Neil Makwana. More details can be found at Consumer Duty Solutions at Leaman Crellin. We also offer Health Checks for firms to ensure that their regulatory health is optimal. As Consumer Duty continues to present challenges, we can help you navigate a path to compliance.
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