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Background

In our fourth and final webinar of this 4 part series, we looked at the Consumer support outcome under Consumer Duty.

There are more platforms available than ever before to meet the needs of consumers. There are two crucial factors to take into account when determining which choice best suits a market for goods or services. 

Firstly, the channel of communication must satisfy the needs of the consumer. 

Secondly, if a product has been created for a particular group, it must be made clear in the advertising for the product or service that it might not be the ideal solution for everyone's needs.

The FCA has published new product governance standards that are relevant to all sectors. The criteria, however, won't be applicable to products and services covered by the present product governance rules found in PROD 3 (for MiFID financial instruments), PROD 4 (IDD and pathway investments), or PROD 7 (funeral plans).

Have a read below of the questions which were asked during the webinar which our in-house experts have answered. 

1. What assessment have you made about whether your customer support is meeting the needs of customers with characteristics of vulnerability? What data, MI and customer feedback is being used to support this assessment?

When making an assessment as to whether your customer support is meeting the needs of consumers with vulnerable characteristics, we need to consider the those characteristics themselves.

The FCA notes the main characteristics of vulnerability as: Poor health, experiencing negative life events, low financial resilience or low capacity.

Poor health needs to be accounted for by making support accessible and varied. Customers disabilities impact on their ability to interact with certain types of support channels, so ensuring that there is something available for persons of all disabilities is imperative. Positive feedback received from customers in this bracket who have achieved no more and no less than what they were looking for is something to look out for here.

If an individual has had a life event that could have a significant impact on their ability to make rational decisions, that needs to be identified. For example, if an unusual payment is made or if unusual activity is noted on an account, it needs to be investigated to determine whether that individual is in the right state of mind to be making such transactions. Unusual activity may also constitute financial crime issues, but either way, it needs to be monitored. Further, if a customer mentions something specific to a significant life event when contacting the firm, necessary steps should be taken to prevent harm coming to the individual.

Those with low financial resilience have very little margin for error when making financial decisions. Customers need to be made ware at every stage of the process, via support functions, of exactly what they are signing up for, how much it is going to cost, what the cost is to opt out and how easy it is to do so. Customers who cannot afford to make a mistake need to have comfort in what they are buying is right for them.

And finally, a low capacity or understanding of the product an individual is signing up for as another potential hinderance customers. If there is a language barrier for example between a potential customer and the financial services firm, a firm should make reasonable efforts to bridge that gap to ensure that the customers understanding of their product is sufficient.

In general, Emoney and Payments firms have a lot of customers who may not be able to get access to a traditional bank account. Therefore, they have inherently more vulnerable customers than would be the case, and need to be aware of this from the outset to ensure they have sufficient support channels in place to assist.

2. Where do you see the main risks to achieving and demonstrating good client support outcomes for IFAs?

One question all firms can ask themselves is whether they are applying the same consumer support standards to deliver good customer outcomes as they do to help generate sales and revenue.

Firms should consider their call waiting times where applicable. Customers should not be waiting significantly longer for their call to be answered in relation to a post-sale issue than to take out a product or service.

Firms should also make sure that the support they provide is effective, regardless of the channel used to provide support.

Firms should monitor the support they provide, take relevant feedback into account, and look for signs that may indicate their channel offering is not sufficient to meet the needs of their customers. 

The FCA expects firms to respond flexibly to the needs of customers with characteristics of vulnerability. So, firms will usually need to be able to provide support to their customers through different channels or by adapting their usual approach.

The FCA has included a poor practice example within the consumer understanding section of this Guidance which sets out a scenario where a customer, unable to read large print or braille, asked their bank to send communications by email to allow them to use software to turn the emails into speech, but the bank continued to send the customer communications on paper. This is the type of scenario where the FCA would expect firms to respond to the customer’s needs and find a solution that offers effective support, rather than persist with an inadequate approach.

However, where a firm does provide support mainly or only through one channel, such as digital-only, there are various factors for it to consider to ensure it delivers good customer outcomes. In particular, firms should consider the following points.

• Communicating the support available. Firms must ensure their products and services are targeted appropriately and the limited channel(s) of support they offer are clearly communicated to customers – in line with expectations under the consumer understanding outcome – before the sale of the product or service, so that customers can assess whether it meets their needs. So, for example, it should be clear to customers that they are signing up for digital-only support if that is the case.

• Ensuring support works effectively. Firms must ensure the limited channel(s) of support they offer are effective and enable customers to realise the benefits of their product or service and act in their interests without unreasonable barriers. Unclear or confusing digital (or other) customer journeys will not meet this standard.

• Dealing with non-standard issues. Firms should also have exceptions processes in place to deal effectively with non-standard issues that could arise in the context of their business. This could include security or fraud concerns, technical issues, or other more complex or sensitive customer journeys. It is likely that firms will need a real-time human interface, such as a phone service, to deal with some of these issues and provide effective support to customers.

• Operational resilience. Firms should be able to continue providing a reasonable level of support to their customers in the event of an issue arising with their services, which might include temporary works, an IT outage, or cyber-attack.

• Customers with protected characteristics. Certain characteristics are protected by law. For example, firms have a duty to make reasonable adjustments for disabled customers under the Equality Act 2010. Firms must therefore ensure that the support they offer allows for reasonable adjustments to be made in these circumstances so they can act lawfully.

• Customers with changing needs. Firms should also be mindful that anyone, including those who are tech-savvy, can become vulnerable either temporarily or permanently. If a customer’s circumstances change it could mean that limited channel(s) of support no longer meet their needs. For example, a customer in financial difficulties could lose internet or mobile access meaning that a digital-only support offering exposes them to the risk of harm. We expect firms to support customers in these circumstances, including in exiting their product or service where appropriate. This does not mean that firms must provide additional full service channels, but rather that they have processes in place to prevent harm to these customers and deliver good outcomes.

Firms should review the design and delivery of their customer journeys and consider the purpose, and impacts, of friction points. In some circumstances, friction points or nudges can help to mitigate the risk of consumer harm and support good outcomes, but they can also create unreasonable barriers by making it more difficult for customers to act in their interests

There can be commercial incentives for firms to create friction points (often called ‘sludge’) that deter their customers from taking action in their interests, such as making a complaint or switching product or provider. Even where firms do not set out to create sludge, they can fail to give adequate attention and provide appropriate support where customers seek to take action that does not benefit the firm. This is not consistent with the Duty.

Firms should avoid causing harm to customers by making sure that their consumer support does not impose unreasonable additional costs, including unreasonable exit fees or other charges, delays, distress or inconvenience.

Where a person is authorised by a customer, or by law, to assist in the conduct of the customer’s affairs (such as where power of attorney applies), firms should provide the same level of support to that person as they would have provided to the customer. 

If a firm chooses to outsource elements of its consumer support to a third party, it is responsible for ensuring the support provided meets the Duty standard. The firm should have systems and controls in place to monitor this and provide assurance that it is meeting its regulatory obligations.

3. How do we embed these changes into BAU?

All firms should be in the process of finalising or have finalised their consumer duty implementation plan. Ultimately, the board of the firm needs to take responsibility for ensuring that consumer duty is embedded into the BAU operations of the firm. Steps they can take to ensure the firm is acting in line with the duty could include:

• Appointing a consumer duty champion, to ensure that the principles of the Duty are followed firm wide; ideally a NED who can step back from the day to day operations of the firm.
  Training can also be provided to ensure staff are aligned with the expectations of the duty and know how to treat customers in line with this.
  
  
• The firm should also identify MI which can be monitored in relation to the CD. When relating to consumer support, the ease at which consumers are able to get the outcome they are looking for should be tracked. Additionally, complaints made about clarity/ease of communication channels should be monitored and actioned to ensure the process is being updated to better suit consumers.
  
  
• I think it’s important in any of these situations to put yourself in the shoes of a consumer. 

What level of support or service would you be expecting if you were encountering a problem and you don’t necessarily have the ability to withstand the pressures of it. Support channels need to be easily accessible, and reliable for customers so they can trust the support they are getting. 

How can we help you?

Thistle Initiatives has supported firms for over 10 years as a trusted compliance and regulatory advisor. In addition to assisting you as-and-when, our team of specialists can serve as your right hand in a meeting and complying with regulations. We understand the importance of staying up-to-date and compliant and are dedicated to providing the guidance and support needed to do so.

For more information about this webinar series and how we can help you with your Consumer Duty arrangements, implementation support, framework review, or ongoing support speak to the team by calling 0207 436 0630 or send an email to info@thistleinitiatives.co.uk.