Consumer Duty – Customer Communications
In the second part of our series on the Consumer Duty Act, we consider how firms need to adapt to enhance consumer understanding and drive good outcomes for consumers.
The FCA’s Consumer Duty Policy Statement will be welcomed by consumers. Major events over the last couple of decades, such as the 2008 financial crisis, or more recently, the Woodford Equity Income Fund collapse, has caused a lack of trust within the industry.
Firms have tried to rectify this by incorporating all complex and critical information within their communications, however the FCA have identified that this is not working from a consumer perspective. Many financial products are complex, which can lead to important messages getting lost if not effectively presented.
So, from a communication perspective, how can firms provide the right level of detail within a format that consumers can understand?
- Understanding consumer needs
Although the FCA have extended the dates for firms to be compliant on all open products to July 2023, and an extra 12 months for legacy products, the extension won’t give firms the opportunity to create the perfect communication suite for all consumers. This will no doubt evolve over time and it’s likely that the use of technology will play an important factor over the next 10 years.
Understanding your customer base is critical as this can help drive an immediate focus.
This is far easier to do when selling products to new customers as there is an opportunity to find out their preferred communication choice, vulnerabilities and how they would like to interact with the firm in future. This can be achieved by asking these types of questions during the selling process, so you understand your consumer from the outset.
It’s more challenging to achieve this with an existing customer base, as it will be dependent on when and why consumers become in contact with their firm. Analysing all processes, the customer journey and communication touchpoints could be the optimum way to identify how and when information can be obtained from the consumer. This will help identify the higher volume processes where there is frequent contact between both parties to help form focus areas.
- Explaining complex information
Fees and charges, product key features and clarifying consumer choices can be difficult to explain in a format where consumers truly understand the information provided. Do consumers really read through a table of fees and charges? It’s often a format used to provide the consumer with this type of information, but it is not suitable for everyone.
Assessing and prioritising this critical information and how it can be presented should be the priority.
The target should be to meet all consumer needs by providing multiple avenues to communicate information of this nature. The introduction of online dashboards to ensure transparency and the ability to compare against similar products would be a good starting point. The Pension Dashboard will go some way of achieving this, which can help the industry catch up with other sectors that use this technology, such as Car or Travel insurance.
Perhaps the use of online videos, visual leaflets or speaking to someone directly could be explored to provide consumers as much choice as possible and demonstrate that firms are meeting the Consumer Duty act by thinking creatively on how they interact with consumers.
- Tailoring Communications
The FCA guidelines are encouraging firms to personalise communications to truly meet consumer preferences. Can this be done in a cost effective and efficient way, without losing some level of automation?
This comes back to how data is captured and stored on platforms to allow firms to identify key groups, like vulnerable customers. By storing customer preferences firms could run reports to identify opportunities to increase personalisation within existing documents.
For example, the firm may have a large population of customers that require large print on letters. This could be built into platforms, so this data is fed into the document solution and still achieve a level of automation.
The roles of financial advisors should not be underestimated here. They are often the group that will really understand their consumer and have more of an opportunity to obtain critical information on their preferences. Having platforms that allow consumer information to be stored, obtained, and analysed will help provide the right messages, rather that the use standard templates, which are used for all consumers.
- Continuous Improvement
Firms are not expected to have the perfect communication tools for all customers by the FCA deadlines. This gives an opportunity to set up governance framework, which is aligned to the Consumer Duty act to continually improve customer understanding.
Measuring communication channels performance using define metrics, listening to customer feedback from complaints and building robust and regular reviews of documents are some of the key elements that can be embedded.
Firms can then evolve and assess whether the use of technology will meet their consumer needs and whether it is a viable business option. The use of technology such as Apps, Online Videos, Scanning and Digital Signatures could be viable options to explore in future. The key is to link this back to your consumer base and assess the right methods of communication for them.
At Simplify, we can help with all aspects of optimisation; from analysing processes, improving customer journeys to delivering digital and regulatory change and so much more. Get in touch with us today.