Consumer Duty Is Good For Your Business (Honestly)

If you cast your mind back to when you were a child, you’ll surely be able to recall things that weren’t very appealing at the time but, on reflection now, turned out to be beneficial to you in the long run.

Visits to the family dentist feels like a good example. All that probing, filling and the dreaded gas (giving my age away now). But without that preventative maintenance, the end result could have been very unpleasant.

Some firms are feeling like that now, as the FCA’s July deadline approaches at speed. Their implementation plans lack completeness, depth or momentum and the whole exercise feels like a huge chore, a significant overhead in terms of resources and cost, without clear and defined commercial outcomes and financial gains.

That’s a very short-term perspective, like standing in the middle of a beautiful landscape and fixing your eyes firmly on the ground at your feet.

The whole point of the Consumer Duty is to create a customer-driven culture, where the customers’ personal characteristics and profiles, financial objectives and expectations are identified and clearly understood. This input data provides the market context for a firm’s products and services to be developed (or sourced) so that they’re aligned with, and focused tightly on, the customers’ expectations. For this to work, all relevant internal and external processes, communications and systems need to be integrated effectively to ensure that the customer journey, from engagement, through sales, onboarding and support delivers a consistently good customer experience throughout. In order for a form to do this, they must understand clearly what their customers’ expectations are. Very few do.

For those who truly “execute with purpose” because they know it’s the right way to go, this will also contribute towards a more positive corporate culture.

Aside from delivering on the FCA’s prescribed customer outcomes, this is the pathway to growth and success for FS firms. Those that persist with the Consumer Duty project and see it through to completion will be rewarded with all manner of desirable gains.

The customer KPIs that matter will be stabilised and trend upward – trust, loyalty, retention, CLV, sales conversions, engagement and advocacy. The order these are in is deliberate. Establishing trust is the primary goal.

Operational KPIs will improve too – for example, complaint volumes will fall, contact centre costs will be easier to control and the cost-to-serve will be reduced. So will errors, re-work and waste, all of which carry significant costs.

If the changes are led from the top, and also cascaded down effectively through different levels of leadership in the business, employee KPIs like engagement levels and retention will be stronger too.

Not to mention all sorts of other related benefits – an enhanced reputation, a stronger brand, a reduction in recruitment spend, lower customer cost-of-acquisition and more.

Those firms with their eyes on the horizon will understand the ultimate financial rewards – higher profitability, greater AUM and balance sheet value.

I’ve heard anecdotally that some executives view the Consumer Duty as “expensive and likely to lead to lower profitability” based on the implementation costs and the impact of the FCA’s expectations around fair value. This is reflected in their relative lack of preparedness.

Let’s unpack that for a moment, looking at costs first. The implementation costs can be perceived as part of transformation and continuous improvement. The ongoing operational gains that accrue from having a stronger customer focus and a more efficient operational model will surely offset these.

In terms of revenue and AUM, any loss of front-end value due to price adjustments will be more than offset by the improvements in customer KPIs.

The smartest FS firms, those already ranked highly for customer experience and employee experience, already understand these points and, unsurprisingly, are the ones who tend to be well ahead with their Consumer Duty planning and execution.

Others are catching up – and they need to. In today’s fast-moving world, where customer expectations are rising, failure to embrace change that benefits customers and employees means firms won’t just stand still, they’ll go backwards.

If you’re not sure how to go about that, a conversation with us at Promising Outcomes might prove illuminating.

First published here.