Announced in July 2022 the Financial Conduct Authority’s Consumer Duty will mark a major turning point for firms in retail financial services. At the heart of the new regulation is a ‘Consumer Principle’ that puts the onus squarely on companies to ensure that “firms…think more about customer outcomes and place customers interests at the heart of their activities.” Paying lip service to customer experience and expectations is no longer enough. Organisations will need to take responsibility for positive consumer outcomes in a way that consumers themselves may be unable to.

Let’s take a closer look at the main themes of the new Consumer Duty and reflect on how businesses can best prepare themselves for its roll out in April 2023.

Customers at front and centre

The full text of the FCA announcement runs to 121 pages; but the essential requirement is for financial services companies to place customers at the heart of everything they do. Specifically, the FCA require organisations to:

1. Provide products and services that are designed to meet customers’ needs, that they provide fair value, that help customers achieve their financial objectives and which do not cause them harm. Companies don’t have to make good investments that have performed badly but they must ensure that everything they do is geared towards a favourable result for customers.
2. Communicate and engage with customers so that they can make effective, timely and properly informed decisions about financial products and services and can take responsibility for their actions and decisions. Consumer Duty is all about deeds rather than empty promises about ‘caring for our customers’.
3. Consistently consider the needs of their customers, and how they behave, at every stage of the product/service lifecycle.
4. Ensure that the interests of their customers are central to their culture and purpose and embedded throughout the organisation.

Consumer Duty is a massive raising of the bar for financial services companies and the implications are significant. These are a handful of what we consider the most crucial impacts of the new environment:

Companies must move to a true Omnichannel service as soon as possible

The financial services industry has embraced new channels but the challenge for many is to make all those channels available on demand and make each an effective touchpoint. It’s essential to break down process and tech silos and ensure that all the data obtained can be fed into central systems. Then, any adviser can see the full customer picture on the next interaction, which is crucial for any organisation to offer truly seamless CX. Research we carried out recently suggested that less than 30% of financial services companies believe themselves to be omnichannel.

‘Omnichannel’ has been ill-defined by organisations for decades. Customers don’t care that you have the latest fully integrated, AI powered channel strategy – they want to ask a question, buy something, and simply feel valued. Listen to your customers – they will tell you where it hurts.

Digitisation will be key to delivering the outcomes required by Consumer Duty

Putting your customers at the heart of your business requires the ongoing cultivation of a relationship which goes far beyond the individual transaction. It’s an intentional, consistent approach by an organisation to provide value at every customer interaction. Ultimately, it increases loyalty. It leads to advocacy. And it constantly evolves as customer (and staff) expectations change.

Gartner has tabled a Customer Engagement Hub as the ultimate aim for optimal customer engagement. They describe it as an architectural framework, binding multiple systems together to engage the customer. It enables personalised, contextual customer engagement, whether through a person or artificial agent, across all touchpoints. It reaches and connects all departments, synchronising customer services, marketing, sales, and operations. We like this Hub concept. It’s not about purchasing and deploying any one solution to provide a new channel or meet a new need. It’s a mixture of flexible technology and the willingness of a company to strive to be agile and innovate experiences.

Company culture and staff engagement will continue to have a primary role

Our research ranked the top three barriers to driving agile CX change in their organisations. The standout blockages to change are related to complex legacy systems (which 17% ranked as their biggest hurdle), a lack of technical expertise (ranked highest by 12%) and several different cultural issues. These cultural issues include: senior management not focused on change; an organisational culture that does not embrace change; and conflicting departmental priorities.

Fulfilling the Consumer Duty will require all financial services organisations to embrace culture change from top to bottom. If any element of your senior or middle management or frontline staff do not believe in the mission to support the customer – it will fail.

Organisations must be able to have access to genuine insights from real-time customer feedback

Placing the customer at the heart of your organisation requires the ability to gather feedback in real-time and across all touchpoints. Only by understanding customer fears, worries and ambitions will businesses be able to respond. Tools like ‘Voice of the Customer’ surveys and ‘Speech Analytics’ will be crucial to driving that understanding. And these will need to be supported by effective insight and analytics capability. Without the ability to parse information and prioritise actions companies will be even more lost than they were.

As the American author John Naisbitt once wrote: “We are drowning in information but starved for knowledge.”

The new Consumer Duty regulations will require a major step-up for many organisations. If you want to know how we can help, please get in touch with Commercial Director Mat Paixao on mat.paixao@davies-group.com.