The FCA have published their 2022/23 Business Plan, setting out the regulator’s areas of focus for the next 12 months. So what should the Financial Services industry be working on to stay ahead of the agenda? I’ve identified a few key subjects in the Plan that I think many firms will benefit from tackling head-on as soon as they can.
We’ve talked about this one a lot recently, and now it’s here – a change in the expectations and measurements around complaint timeframes. The FCA will now be assessing how timely an organisation’s complaints responses are by looking at “the proportion of complaints closed within three days, between three days and eight weeks, and after eight weeks.”. How recently have you reviewed your complaints processes? Would it be helpful to reassess your complaints resource needs? Are there particular types of complaints that are responsible for taking your average closure time up? Is it worth considering specialist handlers with training in that area?
The FCA is looking for a reduction in the number of consumers who are offered “a financial product or service they wanted, but at a price or with terms and conditions that [the consumer] felt were completely unreasonable”. This is a tricky issue on a number of levels – the biggest perhaps being that “completely unreasonable” is going to vary from person to person. For one person a product’s benefits will justify it’s cost even if that cost is higher than they expected, for another the cost will be an impossible barrier to entry. This of course ties into Consumer Duty (don’t worry, more on that shortly) and the discussions that we in the industry have been having [link here to the last CD blog] about knowing and understanding customers. It may well be that you’re already working with your customer base ahead of Consumer Duty to develop a strong understanding of what your specific target market considers fair value – it’s going to be important to make sure your products are priced and designed in line with that data. Does your organisation need to adjust prices? Do you need to develop new products to offer fair value to a greater number of people? How could your terms be adjusted to feel fairer to customers?
Good Customer Support
The FCA wants to see a reduction in complaints relating to “administration or customer services, account access, delays & terminations, account closure [and] cancellation of policies”. There are more clear links to Consumer Duty here and the idea of improved customer care, and this one will also require multiple approaches and considerations. For example, there may be a technological aspect to improving your customer’s account access options and reducing delays and terminations, where improving the service they receive and avoiding administration errors may well need a more human, personal approach. For some businesses that will mean upskilling existing frontline staff, including training on the approach to Vulnerable Customers. This focus area really shows how much we’re all going to need to think about Consumer Duty as a start-to-finish concept that can’t be box ticked with behind-the-scenes Compliance changes – we need to now start thinking about protecting customers right from their first interactions with customer contact staff.
There’s been some discussion in the lead up to Consumer Duty about firms being held more responsible for the actions of third parties working on their behalf. This fits in with another identified area of activity set out for this year – improved oversight of Appointed Representatives. There is a concern that Appointed Representatives are undermining market integrity and consumer trust through misleading and mis-selling, and we’re going to see a shift to the Principal firms being held more directly accountable. The FCA approach here looks detailed and wide-ranging, requiring more details of Appointed Representatives to be made available to the regulator and potentially to be published on the FCA register.
Services to Meet Needs
The regulator also is asking for a reduction in complaints upheld by the Financial Ombudsman Service about “unsuitable advice and mis-sold products and services”. I think it’s reasonable to say that the vast majority of Financial Services businesses are operated in good faith and are always trying to only sell customer’s the products they need. So how can we avoid a situation where customers are getting an unsuitable product? I think firms need to develop an understanding of why and how these complaints are coming about because again, what is unsuitable will vary from customer to customer but there may be some commonalities across your own particular customer base. Is it arising from human error? Are your own staff misunderstanding the products and recommending the wrong thing? Or is there extra information you could provide to customers that would more reliably steer them to make the right choice for themselves? Remember, under Consumer Duty (yes it’s going to keep coming up) we’re going to see a big increase in the degree to which a firm is seen as liable for their customers’ choices, so it’s going to be very important to seriously consider this and deliver solid improvements.
The big headline continues to be our good friend Consumer Duty. So many of the business plan focus areas fall within or overlap with Consumer Duty, and the regulator is very serious about making this a core part of Financial Services in the UK. One of their key activities for this year set out in the plan is a commitment to embedding Consumer Duty “at each stage of the regulatory lifecycle, from authorisation to supervision and enforcement”. Integrating Consumer Duty at the authorisation stage is a topic I haven’t seen much discussion about so far and is definitely one for any businesses in the early stages of authorisation to sit up and take notice of. Anyone thinking Consumer Duty is something they can worry about later needs to instead, tackle it head-on as soon as possible. Any newly created business should work to thread the principles of Consumer Duty throughout their policies, processes and products at the point of creation – the need to be “right first time” could prove to be a very difficult bar to clear for those very new businesses, especially any with innovative new propositions with few clear precedents or points of comparison.
As we expected, the plan reaffirms the commitment to publishing final Consumer Duty rules in July, which may feel like a ticking timer but it will also bring greater clarity about what needs to be done before the implementation deadline. Further positives can be found in the FCA’s pledge to “help identify and work through examples of good and poor practice” during the introduction of Consumer Duty, drawing learning from firms, trade bodies, consumer organisations and wider stakeholders. I know some organisations see Consumer Duty as a long road ahead of them, with a lot of changes needing to be made on a tight timeframe, but it is a road that is increasingly well illuminated. For organisations who think they’re already compliant, those increasing levels of detail and clarity may be crucial in seeing where there are gaps between the pre-existing commitment to good customer outcomes and what is specifically required under Consumer Duty.
On a related knowledge-gathering note, the Business Plan also contains a mention of gathering “insights on consumers’ needs and experiences through our consumer research and partnerships work, for example on the impact of the cost-of-living crisis on consumers” and utilising those insights to inform priorities and actions. That gives us some indication of where the FCA may be focussing later in the year and into next year, with a continued commitment to consumers and acknowledgement that there will be external factors that have a knock-on effect on exactly how Consumer Duty applies.
There’s a lot to consider here – I’ve just picked out the highlights that stood out to me and that I feel will be most relevant to the greatest number of businesses. I would recommend giving the full plan a read and seeing what is likely to have the most direct impact on you and your work. One thing is abundantly clear for all of us across Financial Services – this is going to be the Year of Consumer Duty.
As ever – if Kind Consultancy can support you in your regulatory work, at any stage and level of seniority, get in touch with me on firstname.lastname@example.org or 0121 643 2100. We can connect your business to specialised Consumer Duty Consultants, and will be running a webinar around Consumer Duty soon with a panel of industry experts. We can also assist with the provision of interim resource whilst assessing your permanent requirements. Whatever your needs in this area, we’re ready to work with you to deliver a bespoke solution.