Managing information in the Consumer Duty age

Some managers or boards will micro-manage and focus on differing business strategies – measuring performance and shifting tactics as data dictates. Others will take greater risks or specialisation.

But in the financial services sector, the impact of the Financial Conduct Authority’s ‘Consumer Duty’ requirements has impacted the way every single firm compiles its management information (MI). 

While many firms were used to the previous ‘Treating Customers Fairly’ regime, the Consumer Duty represents an evolution in the way firms are expected to relate to their customers – and focus on the outcomes that the public should experience when engaging with their company. 

For most senior managers, understanding and implementing the new MI and data collection requirements set out by the FCA has become a top priority. 

Now that the Consumer Duty’s driving principle is clear – firms must deliver good outcomes for retail customers – the guidance note FG22/5 from the FCA helps companies adapt their management metrics to improve compliance and create a new management culture. 

This means firms need to be proactive in anticipating and mitigating potential harm to customers; ensuring transparency with both customers and regulators; and routinely delivering fair value and strong standards of service.

In essence, the traditional ‘core’ of management information – financial performance and customer satisfaction – must now be supplemented by a more refined and detailed series of both qualitative and quantitative metrics. This is a significant change in how management data is collected, analysed and acted upon. 

There are several areas where the FCA have been quite explicit in their expectations on MI. For example, the principle of consumer understanding needs to translate into an approach to communications which are clear, fair and not misleading. 

Data on customer comprehension, how effective disclosures of details are to customers, and the ease with which information is accessible are all facets that should be measured and managed. This may be easier said than done, of course! 

Measuring customer comprehension is not a simple task, but firms will need to explore how best to do this. MI that keeps track of customer engagement with their communications, for instance how frequently customers seek clarifications or support after first receiving information, will be worth measuring – as will the outcomes of those interactions. 

Companies are required under Consumer Duty to ensure their products and services are well-suited for the needs of their target market and deliver good outcomes, so the FCA’s suggestions are to tailor MI accordingly. 

For instance, data on product performance, suitability assessments and customer feedback are worth recording, as is information on customer demographics, patterns of product use and whether the benefits originally intended have been fulfilled.

Is the standard of customer service good enough? This is the question the FCA now expect all firms to understand, capturing data on customer support efficiency and effectiveness, response and resolution times and general satisfaction measures. 

It is now particularly important for companies to understand their customers’ vulnerabilities and the process for identifying these where relevant will become an increasing feature in the MI dashboard. Some firms have queried the practicalities of measuring the FCA’s requirements on ‘fair value’, but this concept is unavoidable now the Consumer Duty is in place. 

This isn’t just ‘value’ in terms of the financial outcomes that will need to be measured, but also the broader notions of customer wellbeing as affected by the product, and the impact on general financial resilience and confidence in the purchase outcome. 

Firms will need to record data on how well products deliver value to customers, including a cost/benefit assessment from the customers’ perspective. If the impact on customer financial health can be discerned, then that is the sort of management information the FCA will certainly be hoping firms can gather. 

Companies need to record and understand the risks and how these are mitigated for consumers. For example, MI could include information on potential or actual incidents of consumer harm and the success or otherwise of the firm’s response to these incidents. 

How a company learns from these and prevents future occurrences will also be an exercise worth running. All these are examples of how the Consumer Duty will change the culture of management practices in an organisation and importantly how this data informs strategic decision-making. 

It will mean new investment in data analytics capabilities and a mindset shift from compliance to proactive customer-centric management.

Across all corners of financial services that impact on consumers, this new management approach will require real change that goes beyond traditional financial metrics to broaden a new view of customer well-being and satisfaction.

It gives a new meaning to the phrase “the customer is always right”! Hopefully though this will also arm firms with greater intelligence and improve general resilience in the longer run – an investment in strengthening the business strategies of the industry, not purely an exercise in compliance.