Delivering better outcomes for your customers

What the FCA’s new consumer duty means for advisers and providers

There is a seismic shift happening in the world of financial services. It will change the way that providers and advisers act and engage with their customers. It seeks to ensure that the products people are consuming are fit for purpose and, importantly, understood by the customer making the purchase. This is a fundamental shift for the FCA and is a move away from the caveat emptor and disclosure ethos that has dominated financial services regulation thinking in the UK for decades. The FCA consumer duty has arrived and advisers and providers need to assess what this means for their businesses. 

There are many facets to the consumer duty and it is certainly a step up in the FCA’s expectations for retail customers. It goes well beyond the old mantra of simply treating customers fairly. Overall the new duty is trying to improve outcomes for customers across the whole journey so firms act in good faith, avoid foreseeable harm, and enable and support customers to pursue their financial objectives. 

A crucial element of the new duty is communications and consumer understanding. For too long, customers have been purchasing products on the basis of partial information and without a good understanding of what they are buying. Pages and pages of disclosure that we know consumers don’t read, let alone understand, need to be consigned to the dustbin of history. How providers and advisers engage and communicate with their customers will need to change with the new consumer duty…. just pointing to the small print will no longer wash. 

Clear and engaging communications will be vital in meeting the new duty. Providers and advisers will need to think how they develop their communications toolkit to engage with their customers through the most effective channels. Whether that’s through more traditional communications such as letters and emails, through website journeys and tools, through videos and chat bots, or through the support offered by the customer service team. One size fits all approaches are unlikely to cut the mustard and the FCA makes it clear that firms must consider the characteristics of their customers and tailor communications accordingly. The FCA wants buyers to take responsibility for their decisions which is a good thing, but it is clear that consumers can only do this if they understand the product, the risks, the features, and the implications of any decisions they may make. To come back to a common theme, hiding stuff in the small print will no longer wash in the FCA’s eyes. 

But it is no longer the case that simply having good communications will pass the test. The FCA is clear that firms will need to have systems in place to test and monitor the impact of communications on consumer understanding, to help inform a continuous cycle of improvement. And from a risk perspective, advisers and providers will need to ensure that communications are being taken in by the consumer, and that consumers understand and can act on those communications. 

This is a huge change for the providers, for advisers and, most importantly, for consumers. At Money Alive we’ve been at the forefront of developing interactive communications that tailor information into bite-sized chunks presented in an engaging way and, importantly, check consumers’ understanding through interactive video technology. 

Want to find out more?

If you’d like to hear more about our learnings and experiences to date, and have a demo to see how our Video Engagement Platform works in practice, please book a meeting here. 

Also look out for our upcoming Consumer Duty webinar. More details soon!