The Consumer Duty regulation is designed to ensure that firms act in the best interests of their customers and provide products and services that offer fair value. But how do you implement fair value and how do you test you’ve done it correctly? The Financial Conduct Authority’s (FCA) latest review highlights some key practices.
Actionable steps to implement fair value
The FCA conducted a review of fair value frameworks in the financial services industry based on feedback from industry stakeholders and consumer research. The aim was to identify both good and poor practices with the goal of sharing how firms can meet the new Consumer Duty.
With less than 90 days to go until the implementation deadline (31st July 2023), these actionable steps from the FCA review can help you to implement the Price and Value outcome correctly.
The FCA found several good practices that you can adopt to meet the fair value obligation in Consumer Duty. We’ve added a few helpful suggestions too, and these include:
Considering the needs and characteristics of different customer groups You should take into account the needs and characteristics of your customers when designing and marketing products and services. One size doesn’t fit all. Ensure your products and services are designed for a clear and specified target market.
Providing clear information You should provide clear and concise information to customers about the products and services you are offering, including costs, fees, and charges. Transparency is key here and you must check to ensure your communications are not just received but also understood.
Regularly reviewing products and services You should regularly review your products and services to ensure they continue to offer fair value to your customers. Be aware that customer circumstances can change and make sure there is a fair option for them to adjust to that actually meets their changed needs.
Providing training to staff You should provide training to staff to ensure they understand their responsibilities under the Consumer Duty and are able to provide your customers with accurate and helpful information. Pay particular attention to how you serve vulnerable customers and ensure you have a suitable policy of best practice in place.
These are all practices that we believe are crucial for building trust with customers, creating a better customer experience and increased rate of customer satisfaction.
Of course, the FCA also identified some poor practices that you should avoid if you want to ensure you implement fair value correctly. These include:
Focusing solely on profitability You should not focus solely on profitability when designing and marketing products and services. You must consider the needs and interests of your customers (check out our Voice of the Customer programme).
Failing to review products and services You should not forget about the requirement of ongoing compliance post the launch of a product or service. Continuously monitor market and competitor activity and ensure your products and services are still providing fair value to your customers by comparison. Regularly review customer satisfaction and retention levels to spot any trends of complaints or cancellation and take action to adjust your product or service.
Providing misleading information You should not provide misleading information to customers about the products and services you are offering, including costs, fees, and charges. It may be tempting to not mention ‘hidden extras’ up front but it will be frowned upon by the FCA. Ensure you are clear and transparent and make sure this applies to the entire supply chain where necessary.
Providing inadequate training You should not underestimate the value of training your teams. Ensure all of your staff are fully trained on the cross-cutting rules, outcomes and requirements of the Duty so that customers are supported efficiently and fairly.
Poor practices damage your company’s reputation and can lead to regulatory enforcement, so it’s important to avoid them.
Don’t just comply – impress
The FCA’s review is useful, practical advice for financial services firms and should help you to implement fair value into your products and services, meeting the Price and Value outcome.
However, don’t overlook opportunity when it presents itself. Consumer Duty shouldn’t be seen as just another regulation to comply with but as an opportunity to grow your business. By adopting good practices and avoiding poor ones, you can not only meet your obligations under the Consumer Duty, but you can significantly improve your customer experience to build trust with customers. Impress them with your commitment to their needs. This will act as a differentiator to attract new customers and lead to much improved customer retention and loyalty.
If you need help with resource or any element of your implementation plan or would like to find out more about our solutions that will help to fast track your changes, then download our free guide, or talk to us today.