FCA reviews firms’ approaches to consumer support

The Financial Conduct Authority (FCA) has recently published the findings from its review of firms’ approaches to the consumer support outcome under the Consumer Duty (the Duty), providing examples of good practice and areas for improvement.

The findings are intended to help firms understand the FCA’s expectations in respect of the consumer support outcome and how firms can continue to evolve their approach to supporting customers.

The Consumer Support Outcome

Introduced, in part, to prevent firms using what the FCA has called “sludge practices” or “negative friction“, (i.e. tactics that make it more difficult for customers to act in their own interests) the consumer support outcome requires firms to provide support that enables customers to realise the benefits of the products and services they buy, pursue their financial objectives, and ensure that they can act in their own interests.

As with the Duty as a whole, the consumer support outcome applies on a reasonableness basis, depending on the nature of the product, the characteristics of the customers, and the role of the firm. In its guidance on the Duty, the FCA suggested that firms ask themselves whether they are applying the same customer support standards to deliver good customer outcomes that they do to help generate sales and revenue.

Under the consumer support outcome, firms are required to:

• design and deliver support to customers that meets their needs, including those with characteristics of vulnerability;
• ensure that customer journeys include appropriate friction to mitigate the risk of harm and that customers do not face unreasonable barriers;
• ensure that acting to deliver good outcomes is reflected in their strategies, governance, leadership and people policies, included incentives at all levels; and
• regularly monitor the outcomes from customer support and carry out monitoring that enables them to determine whether retail customers receive the support they need.

In its review, the FCA focussed on how firms satisfied themselves that they were meeting the above requirements and the management information and feedback they were using to monitor the support that customers received.

Good Practice and Areas for Improvement

Overall, the FCA found that most firms were giving consideration to the support they had to provide to meet customers’ needs. 

Examples of good practices set out in the review include:

• proactively understanding the needs of customers – having clear support frameworks aligned to target markets and customer cohorts;
• tailored offerings – having dedicated telephone support for vulnerable customers;
• removing barriers – assessing end-to-end support and removing unreasonable barriers to switching or cancelling products;
• staff training and engagement – using customer satisfaction metrics in replacement of productivity-based metrics; and
• customer focussed governance – introducing a committee to provide a formal route for identifying and mitigating risks that could lead to poor customer outcomes.

Areas for improvement identified include:

• not aligning customer support processes to target markets;
• ineffective post-sale support, such as long wait times and inaccessible information;
• taking a reactive rather than proactive approach to monitoring customer support outcomes, e.g. relying heavily on customer feedback;
• relying on insufficient metrics or feedback to identify issues with customer support processes; and
• not implementing effective management information oversight or information flow with third party service providers (e.g. claims handlers).

Treatment of Vulnerable Customers

Alongside its review of the consumer support outcome, the FCA has also been looking at how firms are supporting customers in vulnerable circumstances, including whether its existing vulnerability guidance remains appropriate in light of the Duty. Separately, the FCA has published examples of good practice and areas for improvement to help firms support customers in vulnerable circumstances

Under the consumer support outcome, firms should ensure that their customers are adequately supported throughout the lifecycle of a product or service after the point of sale. This includes responding flexibly to the needs of customers with characteristics of vulnerability and having processes in place to prevent harm to vulnerable customers.

The FCA has found that, although there were good examples of tailored support, customers with multiple characteristics of vulnerability continue to report challenges. The FCA points to its Financial Lives survey and consumer research which found that customers in vulnerable circumstances continue to report poor outcomes when compared with other customers. However, the FCA has confirmed that its existing guidance remains useful and relevant to the Duty, and that it is not planning to revise its existing guidance or introduce new requirements for firms. 

Areas for improvement reported in the examples published by the FCA include:

• ineffective outcomes monitoring – not being clear on what good outcomes look like;
• failure to give appropriate support – failing to support staff in identifying customers in vulnerable circumstances; and
• failing to embed the needs of customers in vulnerable circumstances into produce and service design processes.

Recognising the complexity and evolving nature of vulnerability, the FCA has encouraged firms to use the examples of good practice and areas for improvement in their work on vulnerability and has stated that it will continue to take account of outcomes for customers in vulnerable circumstances across its ongoing work on the Duty.

Takeaways

The findings from the reviews of the consumer support outcome and the treatment of vulnerable customers do not indicate that the FCA is going to take any action in these areas outside its continuing work on firms’ compliance with the Duty.

However, the findings provide useful insight into the FCA’s expectations in respect of the consumer support outcome.  We recommend that firms take the time to review the examples of good practice and areas for improvement in light of their own consumer support processes and procedures, and seek guidance where areas for improvement are identified.