9 October 2023
Has the Consumer Duty made any difference?
As we move into the third month after the introduction of Consumer Duty, it would be easy to conclude - after a quick scan of the market - that it’s had absolutely no impact.
While it was heralded as a step change in regulation – and a significant raising of the bar in terms of financial services conduct – it doesn’t feel like we have yet witnessed a revolution.
But Consumer Duty was always going to be a slow burn. And for those of us who spend our time looking for the impact, there are already lots of examples of small changes which are definitely a direct result of the new rules.
The most tangible and visible changes are in communication. And while there’s still much to do (most Ts&Cs, for example, are as bad as they ever were), we’re starting to see a new brand of transparency appear across some providers’ websites.
Many firms seem to be finally going much further to let customers know about the downsides of their products – a refreshing change which is vital if customers are going to learn to trust the industry.
One of the most radical examples we’ve seen so far is on Triodos Bank’s current account page – which now includes a clear list of what’s included with the account, as well as an equally prominent list of what isn’t.
The latter is not particularly flattering: no apple or google pay, no ability to pay in via post offices, no interest on balances in your account, no live webchat and no instant faster payments. These are all quite major downsides which, in the past, even an ethical bank like Triodos would not be shouting about. But it’s quite right that customers know all of this before they commit to opening an account – and it reduces the chance of them getting nasty surprises later down the line.
Although you might expect the more ethically minded to be leading the way in transparency, there are plenty of examples of other larger firms grabbing consumer duty by the horns. Aviva, for example, has started to highlight its policies’ exclusions on its website - before customers even start their application. Animal Friends, the pet insurer, has created audio versions of its policies (which it had already got our help writing in plain language before Consumer Duty came along). Virgin Money has added a new line into its savings Ts&Cs committing to letting customers know at least once a year if there are accounts where they could get a better interest rate.
Retention is cheaper than acquisition
I’ve long thought that total transparency will pay dividends for firms given time. If customers feel that firms are working in their interests – rather than laying traps for them – it engenders trust, and loyalty. And – importantly for those keeping an eye on the bottom line – retention is always cheaper than acquisition. What’s more, people are often willing to pay more for a service – sometimes much more – if they feel they are in control, and have built up trust with a brand.
Some of the change being undertaken as a result of Consumer Duty is not so easy to spot from the outside – but will have profound effects.
Last week, I attended an event where a large insurance broker laid out its consumer duty journey in detail – and it was incredibly impressive. They readily admitted that only two years ago, they were focused on profit first and customer second – but demonstrated how this had been reversed in the wake of consumer duty. As well as working on better and clearer communications and gathering a better suite of data to monitor customer outcomes - they had changed their company purpose and values and were embracing major cultural change. On a more practical note, I was particularly impressed by the claim that they are now sending out 5,000 more text messages a week to help prompt their clients to make better decisions.
Not all firms are doing anything like as much, gambling that Consumer Duty is a flash in the pan that won’t amount to much. Interestingly, I know some seasoned consumer champions who think as much – but I’m convinced they’re wrong. The FCA has already shown that it intends to deep dive into how firms are doing on a sector by sector basis – following up with Dear CEO letters where it finds shortcomings. It will be a brave CEO that shrugs its shoulders and ignores these prompts.
Already over the last couple of months, we’ve seen wake up calls for savings firms, investment platforms and GAP insurance providers. And I think there will be much more to come.
Quite apart from the regulatory risk, the other danger of standing still is that eventually it will put firms at a competitive disadvantage. As customers begin to receive a higher standard of transparency and customer support, they will learn to expect it.
It's too early to see the results on levels of trust and satisfaction in our polling yet – but I would expect we will start to see the impact next year as more and more firms complete their initial workstreams.
In the meantime, we’ll be keeping our eye out for changes to the way firms operate and communicate. If your firm has made radical changes in the wake of Consumer Duty – please do share them with us. And if you’re still struggling to get to grips with it, do get in touch – and let us help you onto the right track.