By Caroline Gill, Outside The Box Consultancy
Consumer Duty’s implementation deadlines might have passed, and the initial flurry of fair value assessments is a distant memory. But for some firms, these rules still cause a significant amount of discomfort.
This is because Consumer Duty went way beyond other regulations in that it called for a fundamental change in mindset. It shifted the focus of compliance from a prescriptive, box-ticking approach to a world of judgement and outcomes. For those of us who like our rules to be clearcut, such ambiguity can be stressful.
However, the firms that are thriving today are those that treat Consumer Duty as an opportunity to bolster business strategy rather than yet another compliance project.
Working on the business, not in the business
The biggest hurdle for many IFAs and wealth managers is the day-to-day pressure of client delivery. When you are constantly working in the business (for example, serving clients, processing transfers, managing portfolios), it is very hard to find the headspace to develop the business.
Yet, Consumer Duty, by asking businesses to show that they understand how clients are getting good outcomes, demands a more strategic approach. In practice, this means producing evidence underpinned by data on complaints analysis and service delivery. It involves quite a bit more than simply saying “because I know my clients”.
“Selling the sizzle” to the Board
Compliance has historically, and perhaps humorously, been viewed as the “Business Prevention Department”. To move away from this kind of mindset, it’s vital that compliance leaders change how they communicate.
Innovative firms are ditching dry, 50-page Board reports, replacing them with internal podcasts or recorded video updates to deliver horizon-scanning briefings to their directors.
This is incredibly effective for two reasons: firstly, it helps busy Board members to digest the contents of the report in an efficient way; and secondly, it’s engaging, and getting leaders engaged with the process results in better business outcomes.
My advice to compliance teams is to “sell the sizzle”; don’t just report. Explain to the Board how better data on vulnerable customers helps retain assets. Explain how clear value assessments allow advisers to charge their full fees with confidence, rather than discounting out of insecurity.
The commercial reality of “outcomes”
Beyond compliance considerations, there is a tangible commercial benefit to changing the way you look at Consumer Duty.
Take the annual client review, for instance. In the past, missing this would have been considered a service error. But under Consumer Duty, if a client pays for an ongoing service and doesn’t receive it, it’s defined as a regulatory breach, with potential consequences including fee refunds for each missed year and the need to disengage the client.
The bottom line is that Consumer Duty is actually a way to build resilience. A happy client, who understands the value they receive, does not leave; and a firm that delivers what it promises does not have to refund fees.
When you view it through this lens, regulation becomes an integral part of a sustainable, valuable business roadmap. It forces you to wrap your arms around the client and ensure they are getting what they pay for. Which is exactly what good business looks like anyway.
