What should regulated firms and their teams be looking out for in 2022?

Sarah Lawrence

Sarah Lawrence

Sarah has spent over 20 years of experience in the financial services industry, including over 16 years working at the Financial Ombudsman Service. Sarah specialises in customer service and complaints handling, with extensive experience of management and mediating complaints and is dedicated to passing on her knowledge and experience to businesses to improve complaints handling, customer service and consumers’ perceptions of the industry.

It’s always at this time of year that we seem collectively to draw a line under the 12 months that have gone before us and start to look forward. However, there has been so much regulated activity in 2021, that we would be remiss not to take a moment to consider what we’ve learnt from everything that happened during this time.

Most of us, I’m sure, have noticed the change in tone and stance in the FCA’s consultations and publications. There has been a real tangible shift away from stuffy papers, with grand statements but very little guidance on the practical application. Instead, we now see publications that make their expectations clear, and the consequences if firms don’t meet or exceed them.

The latest round of regulatory webinars, talks, consultations, and finalised guidance all point to the same thing – the FCA wants us to become more empathetic and ensure that consumers are at the heart of everything we do. Whether that’s the design of a new product or service, plans to bring products to market, or even when investigating issues when things go wrong.  The message is clear, customers must come first! It is clear to see when working with organisations that those who understand the importance of having sufficiently resourced and funded teams to ensure that complaints are investigated thoroughly and in a timely manner are more likely to find it easier to deal with in-coming regulatory change and meet regulatory expectations

Regulated firms have the responsibility to keep up with all the regulatory change that is hitting us, even getting ahead (where possible) and making sure we don’t fall foul of any updates coming our way. In the next few paragraphs, we will consider the key areas of regulatory change that you need to keep up with and adhere to in order to not get left behind.

FCA on a screen

Consumer Duty

The FCA has issued its second consultation on its new Consumer Duty. The second consultation is due to close on 15 February 2022, with finalised guidance being issued on 31 July 2022 and full implementation by firms being expected on 30 April 2023.

It would be nigh-on impossible for me to synopsise the entire document here, but if I were to say that the FCA has very clearly chosen and demonstrated its commitment to move from principles-based regulation to outcomes-based, you’ll see that this document represents a seismic shift for our industry.

And if you’re in any doubt about the longevity of this piece of work, you only need to look at the first pages of both consultations, with references to ‘putting ourselves in customers’ shoes’ and looking at the lack of trust that consumers have in our industry, to see this particular regulatory initiative isn’t going away.

The FCA wants us to use empathy in all our dealings with consumers from client acquisition, all the way through to the point at which a customer exits a relationship with a firm. This is in part driven by research and statistics that show consumer trust in financial services firms is at an all-time low.  But it’s not entirely driven by that. The FCA want firms to have a relationship with their customers that is of mutual respect and fair dealing. Judging by the results of the 2020 Financial Lives Survey, with only 42% of consumers trusting us, we have a big job on our hands to shift those perceptions.

You might be wondering what the changes in the new Consumer Duty of Care is going to have on firms. Well, the FCA have outlined the expectations they have on the industry as a whole and what they expect to see from individual firms. This is where a key cultural piece of work lies because it won’t be enough to just tick a few boxes! The FCA wants more from firms in terms of consumer focus at all points in the customer journey and has outlined the key things they will be looking for.

A big part of those checks will include looking at complaints, because that’s where the customer is most honest about a firm and its culture. The FCA has suggested these are the key bits of data it will be reviewing when it comes to complaints:

  • Complaint numbers – trends in poor outcomes for consumers
  • Complaints root cause analysis – fully investigating complaints to fully understand the cause, not just the symptoms
  • Complaint data, together with ensuring it’s easy for customers to complain and they have multiple channels through which to complain

You might be thinking that the above list doesn’t look much different to current requirements now, but the fact that the FCA has said the following, tells us if we are dealing with complaints, we’re under the spotlight:

‘We act where we have evidence that firms are not resolving complaints effectively. The Consumer Duty, in particular the consumer support outcome, will strengthen the requirement to support their customers (including customers with complaints).’  

Putting it bluntly, if your complaints handling isn’t where it needs to be, then now is the time to address and act on this, because I can’t help thinking that the complaints handling processes are going to be a critical element of a firm’s evidence. The data arising and reportable from complaints processes is an easy way for a regulator to get a quick cultural health check, and with a wide-ranging review of products, service, processes and organisations needed, complaints as a key positive metric for firms will be critical.

Where does FOS fit?

Which brings me nicely on to FOS (Financial Ombudsman Service), because there are changes happening there too. But looking at this particular issue, yet again the FCA has made plenty of mentions of using its partnerships with other organisations to bring about a more positive outcome, including FOS.

What does this all mean? Well amongst other things, the FCA has said it wants complaints looked at more thoroughly and who better to look at than the FOS. The CP reads to me as though the FCA wants less nonsense data going through its systems, so it gets better intel out the other end, and so it’s important for businesses to be taking steps, meaningful steps, to improve their complaints handling. 

Anything else?

 You might well be forgiven if you’ve not heard about this important consultation from the Government called ‘Reforming Competition and Consumer Policy’ either, as its title is rather opaque.

This important consultation includes consideration of whether access to Alternative Dispute Resolutions schemes should be easier for consumers. Amongst other considerations, are the amount of time that it takes for people to be able to gain access to an ADR scheme, and the proposals outline cutting timeframes from eight to four weeks. And that includes our ADR scheme, the Financial Ombudsman Scheme.

As you can imagine, if this happens the pressure on complaints handling functions increases, at a time when processes are struggling as it is. So, anything that can help a business streamline its process, and how long it takes to conclude complaints registered, is going to be key in 2022.

So, as you can see 2022 is going to be a busy year for us in complaints handling, and one that will see significant and continued change. All this while we deal with increased numbers of complaints, increased expectations from the FCA and the FOS, but also as we search for more ways that we can better handle and resolve complaints before April 2023.

In conclusion, this leads us to consider how can we improve those processes, upskill the staff and develop a more inclusive complaints management process that is not weighted purely in favour of the firm. (Yes – I know that might surprise you, but we often see examples of that!) 

At Worksmart, we have high levels of expertise in the complaints arena, we have award winning solutions, and are supported by a team of very skilled and knowledgeable regulatory consultants. Could January 2022 be the time to take stock of your complaints handling process and see how the Worksmart team can help you change the regulatory driver around complaints management into a clear business advantage?

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