In May 2021, The Financial Conduct Authority (FCA) issued consultation paper CP21/13: A new Consumer Duty. This paper reviews Consumer Duty of Care and sets out clearer measures and expectations for financial services.
The FCA wishes to see a higher level of consumer protection in retail financial markets. The new ‘Consumer Duty’ would set higher expectations for the standard of care that firms provide to consumers. This would require a significant shift in culture and behaviour, consistently focusing on consumer outcomes, and putting customers in a position where they can act and make decisions in their interests.
There are four outcomes that the FCA has identified as being key elements of firm-consumer relationships and these represent the contact points along the customer journey.
- Products and Services
- Customer Service
- Price and Value
The first 3 elements focus on what is provided by the firm, while the last focuses on payments made by the consumer to the firm.
The FCA proposes to introduce rules that require firms to communicate in a way that, in addition to being fair, clear and not misleading, is understandable and facilitates informed consumer decisions.
They also propose to require more of firms in testing that their communications are understandable and adapting them where necessary to ensure they are supporting this outcome.
To achieve this outcome, the FCA proposes to implement high level rules and guidance requiring firms to:
- communicate in a way that is reasonably likely to be understood and that facilitates decision-making:
- taking into account the likely recipients of the communication, with particular care given to communicating with vulnerable consumers
- at every stage of the product/service lifecycle, from marketing, to sale, and post-sale service – considering the complexity of the product or service they offer, and the channel(s) they are using to communicate
- in a timely way
- take proportionate steps to review and, where appropriate, test and adapt communications to show that the firm has taken reasonable steps to ensure its communications are reasonably likely to be understood and facilitate customers’ decision-making.
What communication changes will it require?
They say “… communications and engagement from firms should instil trust, enabling consumers to make effective and confident choices to advance their financial wellbeing and build positive futures for themselves and their families.”
It is therefore crucial to good consumer outcomes that firms’ communications are specifically designed to give consumers the understanding they need, in terms of what information is provided, how it is provided and when it is communicated.
So firms should:
- equip consumers with the right information, at the right time, to assess products or services and their value and make effective decisions in their interests.
- send communications should be understandable, enabling consumers to evaluate the options available to them, the costs, risks, and benefits attached to those options, and how those options relate to their needs and financial objectives.
- consider the characteristics of the consumers that their communications are aimed at, and tailor their communications accordingly so that they are likely to be understood.
- consider the appropriate level of detail for each communication and take into account the kind of decision to be taken by its recipients, what the consumer needs to know, and where confusion could arise.
- tailor the information they provide to the channels through which they are providing information. A firm might also consider requiring consumers to interact with the firm via another channel before deciding, where the other channel is likely to facilitate a fuller consideration of important information.
- use language that achieves legal certainty in some of their communications but should ensure they bring the most important information to the attention of consumers in an accessible way.
- communicate with their customers in a timely manner, giving them an appropriate amount of time to take in the information and, where relevant, assess their options.
- communicate at appropriate touch points throughout the product/service lifecycle and do so in a way that supports their customers’ decision-making.
Forth can help
At Forth we have years of expertise and experience working within financial and data regulations. We continue to keep up to date on new measures set out by regulatory bodies ensuring communication projects are delivered within the guidance provided.
If you need help with your next customer communication project, please contact us now.