Consumer duty really does create an opportunity for closer collaboration between advisers and providers, and surely the providers most receptive to improving the speed, efficiency and value for money of their products and support services are going to see more customers coming their way from the IFA community.
Strong service capabilities will increasingly prove to be the key differentiator which counts most to ease any potential adviser-provider tensions.
Outcome 4 – Price and value: Finally, the regulator expects consumers to receive fair value. Firms must satisfy themselves that the prices they charge offer a fair-value exchange for the benefits consumers are gaining.
For example, a firm lending to a customer group with high credit risks will need to satisfy themselves that the inevitably higher charges associated with this lending still reflect fair value and illustrate discernible benefit for the target group.
Clearly the IFA is best placed to run whole-of-market product comparisons and share these with customers.
However, there is no reason in the digital world why providers cannot run charge reduction promotions and cross-compare their pricing and/or past performance with a few key competitors as well.
After all, being open to price-matching with Aldi and other so-called low-cost retailers works for Tesco. Why should the same approach not work in the pensions and investments market?
Data-led innovation
New consumer duty regulation will give firms an opportunity to take ownership of data-driven innovation.
The FCA will be pressing to understand how firms are achieving good consumer outcomes. They will look at management information and try to understand how senior leaders in these firms are ensuring that the right outcomes are being delivered for customers.
The regulator will try to see if firms – whether they be providers or advisers – are using all the data and information available to them to ensure that they are delivering these outcomes.
Data collection and usage has moved forward quite significantly over the past few years.
The volume of data businesses have access that gives them more insight into how things are changing for customers.
This intelligence can all be used to inform product selections and new product innovations.
In short, the quality of data sits at the heart of delivering better outcomes for customers and thus is the key enabler of consumer duty compliance.
Preserving IFA/provider harmony
The FCA’s new consumer duty marks the single largest regulatory change in the pension and investments marketplace since Treating Customers Fairly came through 17 years ago, back in 2006.
- It should mark a cultural shift for platforms and providers in particular. They will need to stay in touch with customers more and respond to their declared needs more effectively than they do today. However, providers will also need to support advisers, where they are supporting their customers, to secure better outcomes for their customers.
- Consumer duty also highlights that the yawning advice gap really must be addressed with more simplified, life stage-specific, (perhaps even) non-holistic advice options. Some of this will require increasingly sophisticated, joined-up digital customer journeys that assure positive outcomes, including optimising retirement savings levels.
- There is also a clear opportunity for the whole market to apply open finance models to create data-rich digital customer journeys. Providers will need to collect more and more accurate data on their customers, keep it up to date and maintain permissions to collect and analyse it. They will also need to use that data to uncover insights that can be put to work to serve the customer better. They will also need to learn to put it to work to build more flexible, innovative and relevant financial products, more quickly.
- The work to support the consumer duty should also lead to accelerating the delivery of integrated, omni-channel customer communications and support services. Providers will need to ensure the advice world is supported just as effectively as the consumer. If they are able to take this opportunity to improve how they support IFAs, they will simultaneously help prevent assets flowing away to more efficient and innovative competitors.
The new consumer duty creates a genuine opportunity for firms to utilise data in a different way – putting better financial outcomes for their customers at the heart of the work they do.
