Consumer duty is a hot topic for financial services marketers. Financial Promoter sits down with James Daley, founder and managing director of Fairer Finance, to discuss how communications must change for businesses to remain FCA compliant.
Financial Promoter: How are the new consumer duty rules affecting companies?
James Daley: The new rules are a significant shift of approach to regulation. They push the onus back on firms to not just do the right thing, but to prove they’re doing the right thing. That asks some quite difficult questions. Where it differs from other principles-based regulation that we’ve had in the past is that firms have to prove that they are doing it every year.
FP: What are the factors that companies need to consider?
JD: The first outcome is about products and services. You must have the right product governance in place to ensure that you’re thinking about who you’re selling your product to and ensure you are monitoring customer outcomes.
The second is consumer understanding – so proving that your customers can understand your products and the information that you give to them. This is a significant raising of the bar given that, up until now, financial services has been awash with jargon.
Thirdly, there is the issue of customer support – having to prove that companies have the right levels of support to meet different customers’ needs.
Finally, there is price and value, which is effectively having to prove that they offer fair value in their products.
FP: What is the biggest challenge companies are facing?
JD: Along with customer understanding, price and value presents the biggest challenge for certain sectors particularly. Proving they offer fair value means understanding where you sit relative to your competitors in the market.
This must be in terms of the product features, price, and service, but also being able to prove that your customers have made an informed decision.
Companies need to be able to show that there is a reasonable relationship between the price that they’re selling their products and the cost of them.
FP: How will the new rules affect marketing specifically?
JD: Marketers should make sure they’re working to deliver good outcomes and are communicating in a language that people can understand.
Let’s say a product is coming to the end of its deal. In the past, firms might have just sent one letter and hoped most people don’t read it. That’s not good enough any longer. Marketers need to be sending emails, text messages, and notifications when people log into the app. There will be an increase in communications.
FP: How will the increased communication change the dynamic between company and consumer?
JD: The reality is that the more transparent you are with your customers, the greater loyalty you engender and the greater retention rates you have. I think those firms that continue to play by the old rules will probably find that it hits their business eventually, so it’s in everybody’s interest to get to grips with the new rules.
FP: What should businesses look out for over the coming months?
JD: What we’re going to see in the near future is sector-by-sector deep dives.
Your first instinct as a business may be to see what your competitors are doing. That could prove to be a risky strategy as a lot of the work around consumer duty is going on behind the scenes – when the regulator turns its attention to your sector, you could find that you are left looking like you’ve not taken the challenge seriously. At the very least, you need to show that your business is leaning into the most challenging questions – even if you’ve not yet landed the solution.
This article is taken from the print edition of Financial Promoter. Click here to subscribe.