To improve customer outcomes, the duty demands that providers collect and interpret more customer data and use it to make more automatic recommendations, which may disrupt or threaten the adviser-client relationship.
Outcome 2 — Products and services: companies should provide products that meet customers’ needs, not push unsuitable ones such as with the infamous payment protection insurance. However, the FCA notes that some consumers are still being pushed into high-risk investments, unaffordable credit and unsuitable debt products.
Once the provider knows more about their customers and has perhaps determined that a segment of their customer base is now holding too much in a sub-optimal product for them, the consumer duty encourages them to offer customers a more suitable product.
A provider or platform might want to create an automatic, cost-effective switching service to put this group in a better place. Like investment platforms offer a portfolio-rebalancing service, the switching service should require the minimum of intervention by the customer, save their expressed approval to go ahead.
Again, these interventions by the provider/platform may cut across changes recommended by the customer’s IFA at their next review, causing confusion and conflict.
Outcome 3 — Consumer support: when it comes to customer services, many of us have experienced long call-waiting times to speak to our insurers and reduced access to in-person services. There has been much talk about the FCA wanting to stamp out so-called “sludge practices”, which slow down the progress of insurance claim settlements, for example.
The regulator will increasingly expect companies to provide ongoing customer support and consider various communication channels to find the best ways to engage. The watchdog also wants to see more competitive financial product markets with easy switching, cancelling and complaints handling processes.
The FCA will be monitoring exit fees and transfer speeds to ensure they are reasonable if consumers do decide to move their money elsewhere. That means providers and advisers may need to focus on faster and cheaper transfers, all enabled by technology.
Outcome 4 — Price and value: finally, the regulator expects fair value for consumers. Companies must satisfy themselves that their prices offer a fair exchange for consumer benefits.
Clearly, the IFA is best placed to run whole-of-market product comparisons and share these with customers. But providers can also use digital tools to compare pricing and past performance with key competitors and offer charge reductions.
After all, price matching works for Tesco with low-cost retailers such as Aldi, and could work in the pensions and investment market too. Dunstan Thomas has sketched out a Pensions Value for Money Comparison Tool in its consumer duty white paper if you want to look more closely at enabling this.
