Will tech help or hinder compliance with the consumer duty?

This consumer principle, which sets a higher standard than existing principles around customers’ interests and communications with clients, reflects the Financial Conduct Authority’s positive and proactive expectations of firm conduct, according to the regulator.

When carrying out value assessments, for example, the FCA’s guidance on the duty says firms should collect and analyse appropriate management information: 

“They should collect MI to monitor that the fair value assessments remain valid over a foreseeable period.

"Firms should also record factors considered in their value assessments and should be able to provide evidence if we request it.”

Firms should also collect and make use of relevant MI to monitor the impact of communications and identify areas that warrant further investigation, such as response rates and complaints information, the guidance says.

Utilising management information

It is clear from the final rules that data will be crucial in evidencing compliance with the duty and achieving good consumer outcomes, says Paul Bruns, director of consultancy services at SimplyBiz.

“There is a wealth of suitable MI available, including output from file reviews, customer feedback and complaints data. But it’s key going forward that they start evidencing how they use that data, tracking both how to learn from positive outcomes and taking decisive action to tackle negative outcomes.”

One source of data for qualitative feedback is social media, suggests Richard Barnwell, financial services advisory partner at BDO.

“At the simplest level, review social media sites for feedback. There are several social media monitoring tools on the market that can collate social media feeds and assess client sentiment.

The FCA also makes it clear that useful MI needs to be relevant to individual businesses.Paul Bruns, SimplyBiz

“There are also technologies available that can analyse language in any communications against predetermined company standards for ease of understanding such as simplicity, reading age or inclusive language.”

Client servicing queries can also be a source of information about the way products are communicated upfront, or how information is interpreted, presented and accessed through web channels, Barnwell adds.

Bruns also highlights the FCA’s guidance on the duty, which lists examples of the types of data and information firms could use in monitoring outcomes, such as analysis of records of staff training, customer feedback and complaints numbers.

“The FCA also makes it clear that useful MI needs to be relevant to individual businesses, and proportionate to the size, client base and types of products and services offered by that firm,” he adds.

Beyond the back office system

With most firms having five or less advisers, Jonathan Warren, head of innovation at consultancy Altus, likewise highlights the implications this has on technology and systems with regards to budgets and ways of operating when compared to networks and national advice firms.

However, core back office systems will not facilitate all the data required, says Warren.