Avoiding The Unavoidable

Looking at the latest state of play on Consumer Duty, based on status checks by the FCA plus anecdotal evidence from a number of sources, it brings to mind a couple of related consulting terms I came across several years back. One was “avoiding the unmanageable” and the other was “managing the unavoidable.”

The first term is about staying clear of undesirable situations you cannot hope to control or, at the very least, impact in a positive way. Consumer Duty is not one of these situations. Whilst it may not be appealing to FS firms, understandable given the amount of work that may be required to achieve a high level of compliance, it is certainly desirable from the consumer’s perspective and, therefore, should be something any smart, customer-centric business would want to engage with. It’s not unmanageable either, although firms that assess their current level of compliance as very low may feel that way.

The second term is about facing head-on things that simply must be done and getting on with it, rather than prevaricating and putting off the inevitable outcomes if it’s ignored or simply parked. This is exactly the Consumer Duty dilemma. It requires strong leadership across a firm, with a pragmatic, coherent joined-up plan to meet the scale and urgency of the challenges it presents. This is the only way to avoid the loss of customers, profit, value and reputation.

Tackling the problem effectively upfront also makes the ongoing management easier and less costly. Consumer Duty is not a one-off exercise. It’s about establishing standards and then maintaining them. Partial compliance won’t work. That will be like climbing a rockface and not bothering to put in anchors that secure your position and minimise risk. Any sudden failure will be painful and expensive to recover from.

According to EY estimates, 80% of the firms they have contacted are likely to adopt a “minimal compliance” approach to Consumer Duty. Their belief, which I happen to share, is that the 20% who treat it as an opportunity to outmanoeuvre their competitors are those who will gain maximum commercial advantage.

This indicates clearly that some firms think that being customer-centric and focusing on the expectations and needs of their customers is either too hard or not worth the effort.

Hard, yes. It definitely could be, particularly in an organisation lacking any one, or more, of these desirable characteristics: a healthy culture, strong employee engagement, excellent cross-team working, an agile approach to operations and, where appropriate, high-quality relationships with firms within their manufacturing and distribution chain. But in any firm lacking those attributes, attempts to effect major change will always be fraught with difficulties.

Not worth the effort? That’s much harder to understand. Even cursory research into the key factors that drive strong business results will reveal the necessity for consistency, discipline and excellence in customer experience (CX). Profitability, customer lifetime value, asset growth – whatever measure you choose, great CX is one of the supporting columns.

Another is consistency and excellence in employee experience (EX). And the boat sailed a long time ago on the absolute link between strong EX and strong CX. Unsurprisingly, companies rated highly on CX and EX also tend to be rated highly on the quality of their leadership team.

Consumer Duty may seem like a mountain to climb for some firms, but looking at it and complaining about the height of the mountain won’t make it go away.

Quickly assessing where you’re likely to be non-compliant, and identifying the areas requiring the most urgent attention, is not difficult. I happen to know someone who can do that for you – and it won’t cost anything! Let me know if you would like to pursue this.

If you really want to understand what matters most to your customers, you’ll also want to know how well you’re doing now. Knowing this will enable you to demonstrate powerfully to the FCA that you’re serious about compliance and are taking appropriate action. It so happens that I also know some other people who can do this independently and objectively for you. Not free, but the ROI makes it an easy investment decision. Let me know if this is of interest.

To summarise, turning a blind eye to Consumer Duty, or standing motionless in a fog of uncertainty, will not serve you, your customers or your stakeholders well.

Consumer Duty is not going away. What are you going to do?

First published here.