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Consumer Duty challenge: Five ways to improve client communication – MorganAsh

by: Andrew Gething, managing director at MorganAsh
  • 03/10/2022
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Consumer Duty challenge: Five ways to improve client communication – MorganAsh
The Financial Conduct Authority (FCA) published its final rules and guidance on Consumer Duty at the end of July, but already crucial deadlines are looming.

Firms have only a few short weeks – until the end of October – to produce a plan for implementing the new requirements.  

That plan is supposed to set out how firms intend to prioritise customers’ needs. Under the new regime, they will have to police themselves and report non-compliance to the FCA. 

The rules compel firms to consider – at every stage of the customer journey – the needs, characteristics, objectives and behaviour of customers, including those with characteristics of vulnerability.   

In order to achieve this, they will, of course, need to understand what it is about a customer’s circumstances that makes them vulnerable.  To do so, they will need comprehensive and reliable management information.     

Unfortunately, for many firms existing methods for gathering information on consumers is subjective, inconsistent, and lacking in the right kind of detail. 

 

No shortcuts

The management information challenges are daunting.   

In our experience, many firms in financial services are hampered by an irrational fear of engaging with consumers to gather the right kind of information about them.   

A solution is to seek to obtain information directly from consumers themselves. But unless firms have a specific requirement to seek information from customers, on regulatory or prudential grounds, many of them balk at the idea of asking customers direct questions about their health, lifestyle and other factors that could affect their vulnerability. 

 

Engaging with customers

Success in getting customers to respond can vary depending on how firms decide to communicate with them.   

A response rate of between 30 per cent and 50 per cent is common for email but this rises significantly when firms speak directly with the customer.   

There are also benefits in allowing individual customers to choose the means by which they provide information – on paper, on the phone, or online. Based on our experience, we have devised some guidelines for communicating with customers: 

  1. Although we may be trying to find out about vulnerability, this can have negative connotations.  Positive language is more effective, so it may be better to refer to a customer’s lifestyle or circumstances than use the word “vulnerability”. 
  2. A positive response from customers is more likely if they understand that providing information will help the firm to give them a better service. 
  3. Customers are more likely to respond to short, simple messages and clear language. So, although Consumer Duty may be seen as a compliance task, firms should draw on the skills of those like marketing staff who are good at communicating with customers. 
  4. Although firms may be communicating directly with customers, they should support this with clear online messages about how they use information. This should include re-assurance about the safe storage of data and a clear explanation of General Data Protection Regulations. 
  5. Investing in the training of frontline staff will help them explain clearly and consistently why firms need personal information and how it can help provide a better service for the customer. 

The challenges are numerous, and many firms are still in the early stages of collecting the right kind of management information to help them understand consumer characteristics.   

But the clock is ticking – and firms now need to step up their efforts to meet their Consumer Duty requirements. 

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