insight6 explains the the new FCA Consumer Duty and what it means for the finance industry

With the Financial Conduct Authority’s (FCA) new Consumer Duty requiring financial services companies to adopt a more client-centric approach, customer experience specialists from insight6 explain what this means for affected businesses and how to get the most out of the changes.

The FCA’s new Consumer Duty regulation is one of the most significant shifts in UK financial services. The intention for companies to put the client’s needs first is admirable, but evidencing actions can be a challenge. 

Putting the client at the heart of the business means ensuring every procedure, process, and system keeps the consumer in mind.  

Financial services firms that must be compliant, but also want to build loyalty and drive profitability, will need a customer experience (CX) solution. Keeping clients is critical in a competitive environment, so a CX strategy is imperative.  

What is the new Consumer Duty? 

Consumer Duty is a regulation introduced by the UK financial regulatory body, the Financial Conduct Authority (FCA).  

There are three parts to Consumer Duty: 

1. Consumer Duty Principle. A higher consumer protection standard for financial firms.
2. Cross-cutting rules. Overarching requirements for setting standards of conduct across all areas of a firm’s retail financial services activities.
3. The consumer outcomes. A detailed set of requirements applies to four client/customer relationship aspects. 

Putting the client’s needs first is the cornerstone of Consumer Duty Principle – it is a good business practice to ensure good consumer outcomes. So, a properly considered and managed customer experience (CX) programme is critical to regulatory success. 

What are the three cross-cutting rules of Consumer Duty? 

 The Duty’s three cross-cutting rules set the overarching requirements setting standards of conduct expected across all areas of a firm’s retail financial services activities. 

1. Act in good faith
2. Avoid causing foreseeable harm.
3. Enable and support customers to pursue their financial objectives.  

What are the four outcomes of Consumer Duty? 

The Four Outcomes cover critical elements of the firm-customer relationship.  

Specifically, the outcomes require firms to ensure that products and services meet client’s needs, that pricing is transparent and offers fair value, and that consumers receive communications to understand and get the support they need. 

1. Products and services outcome. To ensure fit for purpose.
2. Price and value outcome. A focus on transparent pricing and fair value.
3. Consumer understanding outcome. To enable clients to make informed decisions.
4. Consumer support outcome – good quality support and after-sales care. 

Obtaining client feedback is one of the best ways to evidence your actions towards achieving the Four Outcomes. A robust CX strategy will provide you with insights to improve good consumer outcomes, become Consumer Duty compliant and increase your profits. 

Managing feedback is a crucial part of the CX process, so working with the right partner is paramount to evidencing your Consumer Duty actions. At insight6, our unique icx6 philosophy and partnership model is your guarantee of great service.

When does Consumer Duty take effect? 

There are five milestones to prepare for the new milestones to take effect.  

The FCA released the final guidance on its consumer duty at the end of July 2022. By October 2022, firms had to agree on their implementation plans. Now, firms must work towards achieving milestone three – completing reviews to meet the outcome rules. 

Duty rules start for available products and services on 31 July 2023, then a year later (32 July 2024) for closed products and services. 

You can view the detailed Consumer Duty timeline online. 

What does Consumer Duty mean for the industry?  

Consumer Duty aims to ensure financial firms take responsibility for operating in their client’s best interests and treating them fairly. Financial services firms must look beyond compliance to strategy, data and technology to achieve this. 

To evidence their intentions and actions, firms must be client-centric, consistently reviewing practices and asking for feedback across multiple client engagement touchpoints.   

The changes are an opportunity to deliver a consistently positive client experience which will add real value to the business over the long term. Investing in a robust customer experience (CX) strategy and tailored solutions will put clients at the heart of the business to ensure good client outcomes whilst building loyalty and driving profitability. 

Continue reading about insight6’s three-step process to evidence Consumer Duty actions and ensure good outcomes on their website.