The Consumer Duty rules set a higher expectation on how firms' communications and marketing teams should enable consumers to make effective, timely and properly informed decisions about their financial products and services.
The ongoing costs of living challenges strengthen the need for a fairer financial system to maximise the likelihood that customers can achieve their financial objectives. Sheldon Mills, Executive Director of Consumers and Competition at the FCA, has said. 'The current economic climate means it's more important than ever that consumers are able to make good financial decisions.' However, what does that mean in practice for communications and marketing teams?
What is the FCA trying to achieve?
The FCA's Consumer Duty rules state that `firms must act to deliver good outcomes for retail clients' including when approving new, or reviewing existing, communications to customers. The rules require consistent and complete communications to support consumers make informed decisions about financial products and services. Therefore, firms are seeking to understand how they can best ensure that customers are given the information they need, at the right time, and presented in a way that they can understand — and, critically, that the firm can evidence it delivers good customer outcomes. Communications and Marketing are important across all four of the outcomes under Consumer Duty, but, naturally they become more critical in both the consumer understanding and consumer support outcomes.
These requirements focus on both the pre-sale customer journey (e.g. marketing and promotion materials and disclosure material) as well as post-sale ongoing client interactions.
What steps should communications teams take now?
Firms must review their current customer experience process to improve support to their customers and evidence the good outcomes it is delivering. Implementing some of the requirements, and demonstrating that critical gaps have been addressed, will take significant time and effort.
- Design of communications channels: Firms need to look at their communications channels holistically and adjust as they transform their business model and change their offering. Most importantly, channels should be seamlessly interconnected and easy to navigate. Also, they need to inform their customers if there is a change, e.g. if a firm decides to close a branch or office location and instead offer online appointments only. In this scenario, some customers may be unable to access digital channels and, as a result, be disadvantaged.
Furthermore, all channels should be well designed and offer full support with staff well trained to interact and react to customer' communication needs. Training should focus on both the most efficient use of the communications channel and how it affects the client's experience. This can be done via e-Learning sessions, immersive vulnerable customer sessions and clear communications on the updated regulatory guidelines. Firms should also be cautious not to be overly reliant on chat bots or virtual communications without the optionality to speak to a person.
- Increase capacity: Firms are facing multiple changes in terms of implementing changes to different channels and via different technology solutions. Consumer Duty will involve a lot of transformational work to achieve (and evidence) good outcomes for customers and especially vulnerable customers. Firms will need to temporarily increase their communications resource capacity in order to deliver dedicated campaigns to implement Consumer Duty changes. Close collaboration is required with the learning team to develop case studies for various customer scenarios that address the four outcomes. This includes updating of existing contracts and customer communications, new direct communications informing customers of changes in customer interaction due to the Duty. Increased capacity will be required in the form of campaign managers, copy writers, and a range of digital communications experts. Consumer Duty is a journey not a destination. Therefore, changes to communications can't be a one-off exercise but should be an ongoing drumbeat and form part of any cultural transformation a firm is undertaking.
- Operations and governance process: Closer alignment is required for communications and compliance teams to meet the FCA's Consumer Duty expectations. Often marketing teams work with sales and product teams to develop marketing materials with compliance only brought in at the final stages. Compliance oversight will be needed in the planning and production process of communications. This is to ensure the regulations are considered across business lines, products, and legal entities.
- Simplify language: The rules require firms to ensure consumers receive communications that are understandable. Financial marketing communications often can be complicated and promote biases and stereotypes or contain sludge practices (unintentionally or otherwise).
- Pre-test and tailor communications messages and methods: To ensure that communications effectively equip customers to make informed decisions, it is crucial communications are tested before mass distribution to check whether any mitigating actions are needed. Testing is a vital opportunity to get outside the immediate brand bubble, check assumptions, and learn more about the customer behaviours. Most common tests are through focus groups, online feedback, structured interviews or via online scenario analysis.
- Measure and improve: Did the communication help the customers? Was it clear? Firms are expected to monitor how these communications are received to determine whether they are consistent with the FCA's desired outcomes. At the heart of this oversight will be measures and metrics, firms will need to evaluate the data they have on their communications and improve them, on an ongoing basis, to meet these regulatory expectations. This needs to go beyond tracking if a communication was received, read and opened, to reviewing whether the content was easy to understand. In order to determine whether the communications were understandable, there are various metrics that can be used, e.g. plain explanation of key information, features, benefits and risks, clear deadlines, full list of exclusions and next steps on how to act.
Change the mindset
Communications is only one area that firms are addressing to meet the Customer Duty rules. It will need to fulfil the four outcomes that frame the key elements of the firm-consumer relationship. Some firms may require an entire cultural shift to a `customer first' approach. The overall culture of the firm should be aligned to the high-level principles and focus on the customer outcomes as, without this, achieving customer understanding outcomes will be problematic.
Consumer Duty is not a tick-box exercise. Firms need to understand the evolving role they play in enabling customers to make good financial decisions. We can support you by transforming your communications and marketing strategy to meet the new requirements and understand Consumer Duty through learning, communication, and behavioural programs.
For other articles on the impact of, implications for firms, and market insights on Consumer Duty, please visit our dedicated hub Consumer Duty - KPMG Global (home.kpmg).