The focus of regulatory requirements should now not only be on the clarity and fairness of the communication itself, but also whether and to what extent it is likely to be understood by the customers intended to receive it.
The new consumer understanding outcome is not limited to promotions, but should be met across all communication pathways.
One key structural change for some advisory firms will be the need to develop more tailored customer communication channels for different customer groups.
Embedding the consumer duty will require firms to tailor their approaches to the particular needs and characteristics of their customers.
While it is clear from the FCA’s policy statement that this need not be delivered to an individual customer level, firms should expect close scrutiny of the decisions taken to group customers – using different characteristics – for these purposes.
Distributors will need to reconsider the ways in which their communication channels support those customers in their target market who have characteristics of vulnerability. This would mean having a well-signposted pathway for customers with visual or hearing impairments to request communications in formats that meet their needs.
Much will depend on the way that firms segment their customer populations and target markets, and the particular characteristics that are used to achieve this.
Clearly, where advisory and brokerage firms engage with customers who have lower financial literacy this will necessitate carefully considered communication pathways across the customer journey.
While the structural aspects of compliance can be achieved in the short term, the cultural change in firms’ approach to retail business could take longer.
Firms will clearly need to revise customer-facing communications and contracts in many cases, but it is important for firms to think holistically about the end-to-end customer journey and all customer communications that can occur within it.
The new consumer understanding outcome is not limited to promotions, but should be met across all communication pathways.
While the structural aspects of compliance with the new requirements can be achieved in the short term, the cultural change in firms’ approach to retail business could take longer and firms will wish to consider the ways in which external support can help embed the new normal.
Firms providing financial advice will first need to analyse their target market in order to tailor their communications appropriately. This will involve understanding the needs and characteristics of customers in that target market and tailoring any communication accordingly.
Jonathan Herbst is global head of financial services regulation; Simon Lovegrove is global director of financial services knowledge, innovation and product; and Matthew Gregory is counsel at Norton Rose Fulbright