Communication is the key to any good relationship. When it comes to communications between financial service providers and their customers, it is particularly important. It’s also legally enforceable. Since July 2023, the FCA’s Consumer Duty guidelines have shaped the way businesses in the financial services sector communicate. A year on, businesses and copywriters in this sector continue to grapple with these regulations.
They know what the Consumer Duty guidelines are. However, it’s not always clear how to integrate them into pre and post-sale customer communications. There may be a real fear about the compliance of branded copy whether this be internally produced or outsourced and internally proofed. This could cause operational bottlenecks when preparing a content brief for a freelancer, and make proofing copy more complex. As well as checking for quality, legal proof readers now need to scan for potential regulatory breaches.
When the Consumer Duty came into force on 31st July 2023, it applied to all “open” products and services – i.e. ones that are available to new customers. As of 31st July 2024, all closed products and services must also be compliant. This refers to products and services that were on the market prior to the 31st of July 2023, but have been neither sold nor marketed to any new customers since.
In this post, we’ll aim to demystify how FCA Consumer Duty relates to your customer communications.
The overall goal of FCA Consumer Duty is to make outbound communications “better”, “clearer” and “simpler”. This means removing technicalities and jargon that assume knowledge on the reader’s part. It’s hoped that removing these will make it easier for customers to make the best-informed decision for their needs.
When outbound communications are clearer and simpler, they are most likely better.
But what might this look like in real terms?
The FCA places a strong emphasis on flexibility when it comes to Consumer Duty. It steers clear of prescriptive requirements in favour of a more outcomes-based approach.
The principal argument is simple enough. In the FCA’s own words, Consumer Duty, ‘sets high standards of consumer protection across financial services, and requires firms to put their customers’ needs first’.
Therefore, every insurance policy, pension agreement and marketing email should:
Not a one and done
Companies must remember that FVA Consumer Duty compliance is not a “one and done” exercise. Rather, it must be sewn into the fabric of their entire outbound communications strategy.
As FCA Director of Cross Cutting Policy and Strategy Nisha Arora said when addressing Deloitte in November 2023:
“It’s something that needs to become part of who you are as a firm, your culture, and how you do business, running across your whole organisation from Board to front-line delivery, from product design to communications and customer support.
To meet the shift in expectations required by the Duty, you need to ensure that your customers’ interests are central to your culture and purpose, and that this is embedded throughout the organisation, in your strategy, governance, leadership and people policies.”
It’s easy to see the implications of the Consumer Duty on many facets of business operations. It plays a large part in Customer Relationship Management, ensuring that customers continue to receive communications in a format that is accessible and convenient for them. It plays a key role in outbound campaigns. Every copy brief that is sent to an internal comms team or outsourced talent will be informed in its tone, format and vocabulary by the Consumer Duty guidelines.
This applies not only to marketing or CRM communications but also to the language of operational documents such as loan agreements, pension arrangements or insurance policies.
The loose phrasing of the FCA’s Consumer Duty guidelines can be both a blessing and a curse. Companies are free to interpret the guidance in any way they choose, as long as the requisite outcomes are borne in mind. And while this may be freeing, it can also be a source of anxiety.
After all, the emphasis of the communications guidance is on simplifying the complicated. And there is no shortage of complication in the consumer finance sector. Loans and credit agreements, consumer banking products, insurance policies, pensions and investment vehicles can all get very complicated very quickly.
In such a climate, companies may feel insecure about whether they’re doing right by their Consumer Duty. Helpfully, the FCA published some examples of good practice in February 2024. These may be used as exemplars, as well as some areas for development that may highlight potential compliance pitfalls to avoid.
Examples of good practice in customer communications include:
Why does FCA Consumer Duty matter? Is it just so that your business can stay on the right side of compliance? Or can it really bring material value to your relationship with your customers?
Peter Wise, an experienced copywriter who specialises in the financial services sector, argues that if you’re doing it right, it can do both.
“The key is in the title”, he told us. “Consumer Duty is not just a box-ticking exercise, but about an ongoing obligation to consumers. And by adopting good, straightforward writing, you’re actually helping your business as well, by making customers look more favourably towards you“.
Peter’s assertions not only reflect the broader aims of the Consumer Duty but also highlight the importance of trust in the consumer finance sector.
Engendering trust should now be a top priority for FS companies as their customers may be feeling financially vulnerable. A combination of long-term austerity, soaring housing costs, a global pandemic and lingering inflation have left many households’ finances in trouble. They look to the sector to help them navigate the trying financial climate. They need help finding the best credit to help with household cash flow, advice when remortgaging, or assistance in protecting what matters most to them.
A committed and comprehensive approach to the FCA Consumer Duty can ensure that every outbound communication helps to build and strengthen that trust among customers.
