Time is running out for financial services providers to ensure they have done their bit to overcome one of the industry’s greatest and longest-standing obstacles.
On July 31, the Financial Conduct Authority will introduce its consumer duty regulations to set a higher standard of client care. And as part of this, it will require financial communications to support consumers fully in making informed decisions about products and services.
The reason for the regulator’s focus on consumer understanding is simple: if individuals are not presented with clear and concise information, how can they make timely and informed decisions?
The good news is that things are already improving.
Back in January, the FCA itself noted that firms were “carefully considering” how they can reform their communications to give customers the information they need, when they need it.
The problem remains, however, that complex communications have now become so ingrained that making them truly fit for purpose in such a small amount of time will be no mean feat.
As we approach the consumer duty deadline, attention should already be on the interactions with customers that sit front and centre of a communications strategy.
This means a fundamental and comprehensive review of all outbound correspondence, customer-facing web pages and any other forms of communication (such as text messaging, marketing campaigns, product literature) to ensure compliance with consumer understanding regulations, as part of consumer duty.
The focus must be on three key facets of correspondence:
1. The understanding of and tailoring of correspondence based on an organisation's knowledge of its customer demographic. How has tone of voice, the relationships with customers, the product design and overall communication strategy influenced how correspondence is designed and targeted appropriately. Having an in-depth awareness of the customer base and understanding customer vulnerabilities ensures that correspondence is appropriate to that consumer group.
2. The format, messaging, style, design, clarity and simplicity of the communications being provided to consumers, with a specific focus upon those items of correspondence that necessitate a call to action. Ensuring that feedback and management information is used to help identify failure demand and uncertainty.
3. The ongoing monitoring and assessment of correspondence in how it is received, perceived and acted upon by consumers. This is a key area in ensuring that the concept of communication design is iterative and subject to continual improvement and assessment to ensure it is appropriate and fit for purpose.
As ever, the rules can be somewhat subjective, but a detailed assessment of all outbound correspondence should identify potential areas of concern that lead to development and rectification work or the introduction of more effective monitoring to ensure the rules are being met.
Earlier this year, we surveyed more than 100 investors with our Consumers and Financial Communications survey; 30 per cent of respondents said they read “very little” of their financial communications, while another 16 per cent said they ignore them altogether.