In this sixth blog in our series on the new Consumer Duty (CD), I will focus on what I believe the ‘Consumer Support’ challenges will be for firms under the new CD rules as well as providing some suggestions on the steps firms can take to comply.
Consumer Support (CS) is the fourth and final consumer outcome that firms are required to meet under the incoming CD regime. At first glance, the demands on firms to achieve satisfactory CS outcomes appear less daunting than the other three. Indeed, this view has some merit, however delivering against all four of the new consumer outcomes and delivering all that the FCA expect, will not be achieved without quite some effort from each affected firm.
The FCA states; “Consumers can only pursue their financial objectives where firms support them in using the products and services they have bought. A product or service that a customer cannot properly use and enjoy is unlikely to offer fair value”, (FG22-5, Section 9.2).
In order to achieve this, the FCA expects firms to:
- design and deliver support that meets the needs of customers, including those with characteristics of vulnerability
- ensure that customers can use their products as reasonably anticipated
- ensure they include appropriate friction in customer journeys to mitigate the risk of harm and give customers sufficient opportunity to understand and assess their options, including any risks
- ensure that customers do not face unreasonable barriers (including unreasonable additional costs) during the lifecycle of a product or service
- monitor the quality of the support they are offering, looking for evidence that may indicate areas where they fall short of the outcome, and act promptly to address these, and
- ensure they do not disadvantage particular groups of customers, including those with characteristics of vulnerability”. (FG22-5, Section 9.3).
If organisations reflect on what has gone before, a key challenge for many firms is that historically they have concentrated more time and resources into generating sales than they have ensuring consumers get good value from the products or services once bought. As such, firms risk falling foul of the FCA’s expectation that firms need to support consumers post sale to ensure they derive value from what they have bought throughout the entire product lifecycle.
A second challenge for firms as they seek to reorientate their support efforts beyond the point of sale is that whilst stating what their expectations are, the FCA are not prescriptive about how firms should go about achieving this, relying on firms to define what is reasonable and how they should be delivering against their own definitions of reasonableness.
That said, in my view there are four key areas firms can review to check whether they are passing the ‘reasonableness’ test:
- Communication Channels: Unless firms are ‘channel specific’, e.g. internet banking providers, they should not disadvantage consumers by only having a single way of communicating with them, e.g. solely via the website or contact centre. Also, these channels should not make things unduly difficult for consumers when making contact with the firm, e.g. overly complex contact centre menus, or under resourcing leading extensive call waiting times. Similarly, firms should be mindful of channelling consumers though lengthy automated processes, e.g. contact centre menus or ‘chat bots’, so delaying and dissuading consumers from speaking with a real person.
- Customer Support Needs: Related to the above, firms should carefully consider their potential customer types in their communications; both in terms of how they identify them and how they then flex their service to meet these needs. These customer types will vary by firm and product, however, the FCA frequently reference consumers with disabilities and vulnerability when making this point. Therefore, these customer groups should be uppermost in firms’ minds when reviewing their support needs.
Also, given the FCA’s references to the sophistication (or lack of it) of many consumers when buying financial services products, the FCA highlight the concept of ‘positive friction’, particularly in the sales process. This is where sufficient steps are built into the process to provide consumers with the time to reflect and consider the course of action they are intending to take.
- Unreasonable ‘Cost’: Firms should consider whether consumers face unreasonable costs in their dealings with the firms. Interestingly, the FCA defines cost in broad terms to include lost time through delays, unnecessary information requests, inconvenience and potential distress caused by consumers navigating their way through firms’ communication channels.
- Unreasonable Barriers: The FCA’s new standards expect that consumers should find it as easy to switch or cancel a product / service as it was for them to purchase in the first place. The FCA provide examples, such as undue delays in cancelling or switching between products and excessive exit charges.
To ensure firms are meeting their obligations regarding CS, firms’ first task should be to map out their existing consumer processes, pre and post-sale, then review them carefully against each of the areas listed above. Once reviewed, firms should be prepared to reengineer some of these processes to ensure they are meeting the new expected standards.
Once this has been achieved and, firms are in a position where they believe they are meeting the new standards. However, firms also need to be mindful that although the FCA accepts that at times firms’ communication channels may get busy, they will have a low tolerance of interruptions to service, (see the FCA’s latest rules on Operational Resilience, (PS 21-3)). Additionally, as firms increasingly seek to outsource different processes, the FCA is clear that, even if outsourced, the efficacy of customer processes remains with the firm.
And when firms have reviewed and likely revised their customer facing processes, they should also cast a critical eye on their monitoring and governance arrangements:
Monitoring: The FCA is clear that it expects firms to assess whether their revised processes are working as intended and this means conducting rigorous analyses using a wide variety of data sources, (see Section 11.3 of FG22-5 for examples of the data the FCA expects firms to use).
Governance: As with the other parts of CD, the FCA expects that firms should review their governance arrangements and their suitability given their increased responsibilities and additional data they need to collect. This means a ‘root and branch’ review of governance policies, procedures, responsibilities and resourcing.
So, although the CS outcome of the incoming CD may be less challenging than some of the other outcomes, it is far from an ‘easy ride’ for firms. Let’s hope that for consumers’ and firms’ sake alike, firms take this outcome as seriously.
In my next, and final blog on CD, I will review what this all means for firms and share some of my thoughts on how firms can best use the forthcoming months to ready themselves for the incoming duty.