The new consumer duty is an opportunity to utilise data in a different way

A new consumer duty requires all market participants to focus their efforts on improving outcomes for consumers in four key areas:

Outcome 1 – Consumer Understanding: The FCA now expects products to come with timely and clear information that customers can understand so they can make informed financial decisions.

They are making complex choices about debt levels, mortgages, pension savings, investments and other products.

Increasingly they are investigating all this on their smartphone and often making changes via that same device. Digital interfaces must be responsive/smartphone-ready. 

It is more important than ever to ensure they have received and read the key product information such as its key features and charges.

This information needs to be easily accessible, written in a way that is understandable and, ideally, it needs to be comparable with competitor offerings. 

The FCA is most likely to be impressed by firms that embrace the idea that providers should know who is actually reading their communications.

It is not enough to know what proportion of your customers open their annual benefit statements. You now need to know their names as well and how long they spent viewing these documents.

Electronic delivery lends itself to this, and for repeat ‘offenders’ (not opening anything), a firm can switch to alternative channels for getting messages across, perhaps delivering them at the right time of day for that individual to pick up and read.

This requirement takes the level of communication beyond what providers have hitherto been used to.

They can no longer just post out regulatorily required documentation such as the annual benefit statements and hope that somebody, somewhere reads them.

In the future, they will need to make sure they are continually improving these documents, stimulating feedback and interaction with them.

Compliance with consumer duty will inevitably stimulate more digital interaction between policyholders and policy providers. 

However, for wealthy individuals, many of whom have independent financial advisers, will this mean they will be receiving documentation and reminders from providers that are ‘out of sync’ with adviser check-ins, and possibly even advocating changes that the customer’s IFA then advises undoing? 

Perhaps an early indication of conflicts to come shows itself in current communication prompts of D2C platforms, which all too often send a reminder to top up the Isa or Sipp you hold on their platform, not appreciating that you might hold other pensions on other platforms and have perhaps maxed out your Isa contributions this tax year in your bank-provided Isa. 

It becomes clear that helping your customers achieve better financial outcomes means knowing far more about them than providers previously gathered.