Consumer Duty

Introduction

The Financial Conduct Authority (‘FCA’) introduced a new Consumer Duty in July 2023. It represented one of the largest regulatory changes that the finance industry has had to address in recent years. Clients and firms should all benefit from the new regime, which focuses on firms delivering ‘good outcomes’ for customers. This standard applies across the industry, from mortgage lenders and insurance providers to financial advisers and investment managers. It replaced the concept of ‘treating customers fairly’, a standard introduced by the FCA over 15 years ago.

Overview

We welcome the new Consumer Duty (‘Duty’) and its aim of improving the standard of services that customers receive across the financial services industry. The new duty focuses on ‘good consumer outcomes’ and all regulated firms were expected to have completed their plans and be meeting the regulatory requirements of the duty by Summer 2023. This year, there was considerable media coverage about the regulation. You may have been contacted directly by your car insurer, for example, to explain how they propose to ensure that they deliver their obligations to you under the Duty. You may have received a change to the standard terms of business that your bank, for example, is providing. Do ask questions if you are unsure about what is involved and how it might impact you.

The change has been described as ‘revolution, not evolution’ and we believe that it is incumbent upon everyone in our industry to make the changes needed proactively. Our CEO, Nick Coghill, comments “We pride ourselves on achieving the highest levels of service for our valued clients and we are seizing this opportunity to further enhance our client support to ensure good outcomes are delivered.”

Determining whether consumers have received good outcomes will be measured based on the individual customer experience. The new Duty invites us to look at the journey that you take with CAM. It emphasises the importance of achieving high standards of service and communication during the ongoing management of your portfolio and provision of advice to you, not just at the stage when you first join us. We are a people-focused business and have enjoyed rising to the challenges that this has presented.

Implementation of the Duty

We first established a Working Group to examine the draft regulation in 2021 and a team representing all areas of the business has been meeting regularly ever since. This embodies our approach; the Board and Senior Management have been key drivers, but all staff have given input and are being trained to know what is expected of them. Implementing the Duty is far from being an exercise that is owned solely by our Compliance team but, of course, ensuring that we have achieved full compliance with the regulation is a primary goal.  Initiatives have included the creation of a new client feedback log and the appointment of a Client Experience Manager, both intended to capture the views of our clients, positive or negative. We’ve also been revising our agreements, website, and marketing materials to support the Consumer Duty areas of client understanding and communication. If you’d like to discuss any aspect of the regulation with us, please get in touch with your usual CAM support team or  Tracy.Coghill@city-asset.co.uk (Tracy is our new Client Experience Manager).  

We’ve set out below some FAQs that may be of interest.

Did you meet the deadlines for the implementation of the new regulations?

Yes. We’ve been working on this project for nearly 3 years and had a strong plan ready for the first deadline in October 2022. Since that point, we’ve committed significant resource to implementing the action points and identifying further areas where we can enhance our offering. However, even after the deadlines in April and July 2023 and July 2024, we will continue to work to ensure that the good ideas that we are generating deliver results to our clients. We see the duty as providing additional motivation to continue to focus on all aspects of our client service over coming years, not just to meet regulatory rules.

What resources have you used to deliver Consumer Duty?

The Board and our Executive Committee have led the process, but staff at all levels of seniority have been involved throughout, working together in our Consumer Duty Committee. We also worked closely with industry bodies that organised Consumer Duty working groups. We spoke with lawyers and consultants but this was a project that was driven by the business, itself. We used IT resources as appropriate, but we fully recognise that our clients value their personal contact with our team and this ongoing relationship is at the heart of our service.

Can you tell me more about how this may impact me?

We have carried out a considerable amount of work on the price that we charge for our services and the value that we deliver. We have been drilling down into every aspect of cost, price, deliverables, and value added. We worked to ensure that you are equipped with all the requisite information to ensure that you are aware of not only the cost of our service but also the value-added areas as well. We hope that this will lead to greater transparency about our costs and charges and understanding of this area, which we appreciate can be complex and confusing.

We’ve also been working hard to ensure that we enable clients to make strong decisions based on good understanding of the risks and benefits of different services. Our recent Customer Survey gave us some excellent insights as to what we are doing well but, even more importantly, those areas that we need to work harder on. Communication is key. We’re in the process of significant changes to our website and client portal to make it easier for those who want to access information electronically to obtain the data that they need. This will also free up additional resources for us to deliver the crucial parts of our highly personalised service that will never be provided online. Continuing the communication theme, we picked up on client feedback and have introduced Executive Summaries in written materials and redoubled our efforts to cut down on jargon.

Today, we have an ongoing exercise to capture as much client feedback as possible, from simple emails of thanks for a job well done through to more complex situations in which, for example, we may have experienced delays to transferring in client assets from a third party. Building this database is providing a continuous list of ideas for development and improvement. We will add to this by repeating our client feedback survey in Winter 2023 to measure our progress over the past 12 months.

What about other areas of the industry?

The regulation affects different sectors in a variety of ways. For example, we understand that there will be an industry wide approach by fund managers, building on rules that have governed them for the past 5 years. In terms of our fellow discretionary investment managers and financial advisers, we are a member of several working groups to ensure that we are continually benchmarking our own efforts and sharing ideas in the community to benefit us all. We are also tapping into the wealth of resources offered by the big law and accounting firms and management consultancies, but very much continuing to drive implementation by considering what’s best for our clients, not relying on generic advice.

How does Consumer Duty impact clients who may need support with health issues or might be struggling following a bereavement or job loss?

We have created a group representing all departments to ensure that we provide a robust service to clients who may find it more challenging to achieve good outcomes. We have been working closely with staff, changing policy and procedure, developing new guidance and oversight, and looking at IT solutions to make information more accessible. This is certainly an area that we will continue to work on as we all agree that we are continually learning and trying to develop support techniques. Whether it is reassuring a client who is suffering anxiety because of change in financial circumstances or offering support to the family of a dementia sufferer, we are determined to set ourselves the highest standards of service. We are working closely with industry bodies and have launched a new overlay to our website to ensure all clients can access information easily. However, it’s the people skills that are most important in this area and our programme of staff training and development means we are actively working to meet the challenge.

What have you found most challenging?

Our regulator, the FCA, needs us to measure performance to demonstrate that we are delivering our obligations to our customers. Deciding what to measure and how represents a challenge for everyone in the industry, including ourselves. We expect that the annual review and assessment of evidencing ‘good consumer outcomes’ will evolve over time as the processes are embedded into businesses.

Is there anything else that has been very important to your work on Consumer Duty?

Culture and training has been very important within our approach to Consumer Duty. There have been several firmwide training sessions on Consumer Duty in more general, regulatory terms over the past months. We have also continued our programme of training on client service, including delivering effective presentations and handling complaints. Staff have also been receiving training  for their specific team responsibilities and general skills training; for example on clear writing and communication, and additional information on particular aspects of the services that we provide, such as seminars on alternative investments. Client feedback, including our Client Survey (November 2022) has also been very helpful in identifying areas where our approach is working and those where we need to make changes.

Conclusion

The new Consumer Duty is not something that we are afraid of; we are confident in our ability to enable our clients to achieve good outcomes. For firms who provide a client focused service, the key issue is further documenting and evidencing everything that we do in practice. Our work to date has led to some excellent initiatives which we will build upon. Working in a collegiate, knowledge sharing environment will ensure that we will achieve the desired results for you.