Consumer Duty…Stop & Think

By Harry Cruickshank

The FCA’s Consumer Duty (CD) is causing ripples throughout retail financial services (RFS). In the FCA’s own words, the new rules “require a significant shift in culture and behaviour, where they (firms) consistently focus on consumer outcomes…”

By now, all firms should have outline implementation plans ready (although a significant percentage do not). Among those who claim to be ready, there is nervousness about how practical these plans are and if they can be executed effectively.

Fundamental changes give rise to strong emotions, including frustration, anger and anxiety. Prolonged periods of change, which this is guaranteed to be, can be physically and emotionally draining. Following the long, drawn-out COVID pandemic and its impact on the workplace, resistance to the necessary CD improvements seem inevitable.

The CD mechanisms need to be executed well and embedded within firms. Negativity will affect employees’ behaviour and performance, as well as their general engagement and well-being. What to do?

Let’s stop right there – and flip this around. If someone is experiencing a negative reaction, we need to dig deeper to find the source of that response. Once we understand that, we can challenge it and problem-solve to create a positive mental shift. Perhaps employees feel they’re powerless and will simply be swept along in the changes to come. Maybe leaders just perceive this to be more work with little commercial reward.

The Leadership Opportunity
Truly effective leaders are used to adaptation. They know that stasis is unhealthy and commercially undesirable – if you’re not moving forward, you’re either stuck or going backwards. Once they realise something is inevitable, rather than viewing it as a problem or nuisance they explore ways to make the most of it and create opportunities for growth.

Let’s look at an example. As a leader in financial services, you may be worried that CD will reduce corporate revenue, profits or AUM by putting pressure on prices or pushing customers to competitors. Both concerns carry an element of truth and therefore risk.

But stop and think; surely anything that aligns a firm better with its customers, now and in the future, is more likely to drive customer trust, loyalty, retention, repeat purchases, CLV and brand advocacy? Trust, loyalty and advocacy are all OUTCOMES of meeting expectations, so the first step to achieving true CD compliance is to understand the consumers’ expectations.

And therein lies the opportunity; embracing CD, and going beyond the minimal compliance approach is a golden chance for FS firms to retain customers, increase revenue and boost brand image.

The Employee Opportunity
From an employees’ perspective, there’s a yawning gap between passive acceptance of changes fed down from above and a more proactive approach to CD, where they engage actively with colleagues and look for ways to add value during this period of change and to adjust to a more customer-focused way of working.

The best way to start is to work internally. By rethinking their role and treating colleagues more as customers to whom they supply a service, all employees will have to think about what works, what doesn’t, what and how to improve and where the benefits to both parties lie. If this drives better collaboration at a cross-functional team level, then changes can be driven from the ground up, empowering colleagues at the same time.

If smart firms encourage and support individual employees and teams to behave this way, it’s highly likely that CD change projects will function more smoothly and result in better outcomes for all.

There’s no downside to trying to make this work. If a more connected, collaborative, focused workforce is on your Christmas list this year, a positive approach to CD is more likely to deliver results and those who take on the challenge with enthusiasm are likely to have a far happier New Year than those who resist.