Consumer Duty is perhaps the single largest challenge for financial service research and insight teams in the past decade. Customer understanding has been a particular point of focus for many brands and the regulation has dramatically increased the volume of retail customer communications that are being tested, while also requiring customer understanding to be integrated into governance capabilities.
As those of us who have been involved in Consumer Duty know, that’s not all consumer duty means to financial service brands. There are focal points on, products and services, price and value and also customer support.
Ultimately consumer duty is there to ensure financial service firms provide products that meet customer needs, offer fair value, deliver clear information, and provide effective support to consumers.
Given that many brands have been implementing frameworks to prove they meet Consumer Duty regulations for the best part of two to three years, we thought it was a good time to take a step back and explore learnings from Consumer Duty so far.
Taking Learnings Across the Business
The key to making sure that communication testing doesn't simply become a tick-box organisation, which has been a worry to a number of insight teams across the sector, lies in the communication of the learnings. It's not simply enough to feedback to the document owners about what is and isn't working with the individual document; we need to be making sure those learnings are being spread throughout the business and it feeds into other communications, and importantly into the initial development of new documents.
But how do we do that? Our roundtable attendees shared ways in which they were helping to better communicate their Consumer Duty learnings which included Best Practice guides and Learning documents which are updated regularly and shared across all document owners.
We at FlexMR have been running Insight Consolidation Sessions as part of our Consumer Duty Toolkit which bring together learnings across all communications tested in a quarter, as well as the wider stakeholder group from document owners, governance and brand, to name a few, to help disseminate those learnings and discuss implications in a more collaborative sphere.
Where Does the Responsibility for Action Lie?
A hotly discussed point in the roundtable was where does the responsibility lie for taking on board feedback from the vast amount of communication tests done, and making changes to improve customer understanding - is it the responsibility of the insight team, or is it the document owners, or is it compliance and governance?
Those who have an assigned Consumer Duty Manager, have found this easier, giving someone the sole responsibility of overseeing how the firm is meeting the regulation means that they take ownership and drive improvements. For those where that role doesn’t exist, this is where the confusion of responsibility occurs more commonly.
Outside of having the dedicated role, to help drive more action from feedback, bringing document owners more into the actual research, rather than just leaving them waiting for the debrief has become more common.
Connecting colleagues more directly with customers, through encouraging viewing of interviews and focus groups and hearing the feedback first hand, seeing the look of confusion on a customer’s face, makes it far more impactful and more likely to drive action. But what about once changes have been made? Getting to know the changes being made as a result of Consumer Duty testing is clearly a pain point that many are experiencing.
One of our roundtable attendees has an action tracking spreadsheet to try and close this loop in which they are following up in X months’ time to ask what has been done with the insight. But this raised the question as to whether this the best use of resourcing. Yes, it's worth doing, but time consuming. Something that perhaps still needs refining, is we get document owners to be better at sharing the changes they are making.
Identifying and Proctecting the Most Vulnerable
Within Consumer Duty requirements there a focus on vulnerable customer. The FCA define a vulnerable customer as someone who is especially susceptible to harm. The definition is linked to an individual’s personal circumstances and not focused on specific groups. Triggers for vulnerability can include, health, life events, low resilience or low capability.
According to research from the FCA, in 2022, 47% of UK adults showed one or more characteristics of vulnerability. With the broader definition some customers won’t necessarily identify themselves as being at higher risk of harm which has been highlighted by NICE. They identified that whilst only 17% of customers believe they are vulnerable, up to two thirds of adults could be classified as vulnerable according to the FCA’s definition.
Some firms have self-reported vulnerability as under 10% in their customer bases. There is a huge discrepancy that needs to be addressed.
There clearly is a lack of awareness amongst the consumer about what puts them at risk of financial harm, but that’s not just restricted to the end-consumer. Some firms have been tackling the huge discrepancy in self-reported and actual vulnerability flags through colleague education. By providing toolkits and guides as to what puts a consumer at risk, building Vulnerability Hubs on internal intranets, teaching customer facing colleagues listening techniques this goes along way to building education and being able to better identify the vulnerable customer.
An important element that the roundtable attendees highlighted was the need to have customer databases which can flag not just whether someone is a vulnerable customer, but whether it’s a long-term, or a short-term vulnerability. Being able to have this differentiation is key.
However, knowing someone is more susceptible to financial harm isn’t enough. We need to better understand what that vulnerability means, and that’s exactly what some of the organisations we spoke to in our roundtable have been doing. They’ve been lifting the lid on vulnerability more, understanding what different vulnerabilities mean in terms of impact on the individual, and mostly importantly for the sake of consumer understanding, what it means in terms of how they interact with and understand information.
Understanding peoples lived experiences with vulnerability is key, and Customer Closeness programmes are an ideal way of doing that. Approaching it in this way goes far beyond just understanding vulnerability on a page, it connects decision makers with vulnerable customers and makes it far more powerful.
There was complete agreement that if firms design communications, and offer support with the vulnerable customer in mind, then it will also meet the needs of the non-vulnerable customer. Perhaps this is something that all sectors, not just those in Financial Services need to consider as well?
Concluding Thoughts...
The more we can build a customer-first mentality bringing everyone to see the customer first hand, the better chance we stand at getting the customer and their needs to be front and centre of organisation’s purpose and culture. This is what the FCA is trying to do with Consumer Duty.
Taking this step back to remind ourselves of the purpose is important to help it stop from becoming a tick box exercise, and then make it a significant strategy that creates better customer outcomes.
