Monitoring and testing customer outcomes
It is intended that the package of measures, which focuses on outcomes for retail customers, will challenge firms to reorient their business to act to deliver good outcomes for retail customers.
Monitoring real world customer experience and the outcomes received by customers is central to embedding the consumer duty and to compliance with the new consumer principle, principle 12, which requires a firm to "act to deliver good outcomes for retail customers".
While the new rules and guidance contain, in some areas, specific monitoring and testing rules and associated guidance – for example, in connection with testing, monitoring and adapting customer communications – it is clear that the FCA expects firms to monitor and test customer outcomes in a holistic way to ensure that the firm is acting to deliver good outcomes for retail customers.
The nature of this monitoring, testing and challenge will be central to the annual attestation required to be given by the firm’s board or other governing body.
In very broad terms, there are three core components to this from a systems and process perspective.
The first is the need to ensure that the firm obtains the data it needs to assess whether the outcomes its customers are experiencing are consistent with its obligations under the consumer duty.
The second is the need to assess and interrogate this information, to determine whether customers are not getting good outcomes, and any incidence of customer harm.
The third relates to the escalation and remediation of any instances of customer harm identified through monitoring and testing; to prevent such harm occurring in the future, and to learn lessons for the wider business and retail customer services from these cases.
Within this, firms should be mindful of regulatory reporting obligations and any new systems and processes that are required, particularly given the new rules and guidance in this area surrounding other firms in the chain of distribution.
To develop the first strand of this, building new systems to monitor customer outcomes will require an assessment of both the information to be obtained and the most appropriate means to obtain it.
In connection with the former, the FCA has issued updated guidance, through finalised guidance 22/5, which provides additional clarity on the data points that firms should consider in order to monitor customer outcomes to ensure that they are consistent with their obligations under the consumer duty.
It should be possible to leverage and adapt existing touch-points with customers to assist, for example through customer feedback, focus groups or deep dives, but firms will need to challenge themselves as to whether new processes are needed, too.
For example, some firms will track drop-off rates and obtain other behavioural insights, but may not do so in ways that facilitate the interrogation of overall outcomes for customers and whether, for example, the firm’s services as a whole help customers achieve their financial objectives.