Consumer Duty one year on: the imperative of creating the right culture

Consumer Duty has now been in place for a year, with firms’ first annual reports for open products having just been submitted.

During recent industry engagement, the FCA has raised a number of observations around the standard of firms’ embedding of the Duty, with many of these relating to the availability and interpretation of data and the impacts of this on firms’ reporting capabilities.

In its most recent industry webinar, the FCA cited that during its market engagement, the best examples of consumer duty adherence were demonstrated by firms that have embedded it thoroughly into their organisational culture. Here, we look at what this really means, and the actions firms can take to ensure that they are enabling a truly customer-centric culture.

1. Reframing the Company’s Core Purpose

At the heart of embedding Consumer Duty lies the need to reframe your company's core purpose, taking your people on the journey to understanding the business’s evolved obligations and their own responsibilities therein.

Education should be delivered for staff, providing context and specific guidance aligned to the firm’s customer base, products, target market and risk profile. Their actions and behaviours must prioritise customer outcomes, and this requires a shift in mindset from ‘attaining compliance’ to genuinely placing the customer at the centre of every decision. 

When the organisation’s core purpose is defined in terms of customer wellbeing and satisfaction, it becomes easier for employees to align their daily activities with these values.

2. Developing Data and Metrics

To effectively monitor performance and understand customer experiences, firms must ensure they use available data effectively, focusing on the metrics which accurately illustrate outcomes.

Developing hard-and-fast rules for this can be a challenge when all firms are unique in their products, services, customers and desired customer outcomes. This involves not only tracking traditional performance indicators but also introducing innovative measures that provide deeper insights into customer interactions and satisfaction. 

Whether a customer is using web chat, making a telephone enquiry, having a complaint upheld or rejected, or calling following receipt of a communication which has confused them, there is potentially rich and deep insight to be gleaned. Don’t just isolate your view of performance to a handful of linear production and quality-related metrics.

Appropriate governance structures should be in place to ensure that when problems are identified, swift and effective action is taken. This proactive approach helps maintain high standards of customer care and swiftly addresses any issues that may arise.

3. Leveraging Insight to Enhance Customer Outcomes

To deliver better customer outcomes, firms must harness available data and insight, conducting thorough root cause analyses across products, customer journeys, channels and servicing. This means looking beyond surface-level metrics to understand interdependencies and the broader customer experience. 

For instance, rather than solely aiming to improve call abandonment rates, firms should adopt an holistic approach which seeks to understand and address the underlying drivers of call volumes. 

By adopting this approach effectively, firms can hone in on the real issues at play, making changes at product, policy, process, governance, channel, system or customer journey level with confidence.

Being effective here involves examining the interdependency of various metrics and how they collectively influence the customer journey. Best practice root cause analysis can isolate the true underlying issues that, when addressed, can lead to significant improvements in customer outcomes.

Core principles of doing this effectively include the need to understand:

• The system landscape and capability
• The desired customer journey and outcomes you wish to provide
• The available data, i.e. what information is gleaned from customers at each stage and where it resides
• How to interpret this correctly and use this insight to form proportionate improvement actions
• The feeding of improvements into the process at the appropriate point through changes to product, policy, process, governance, channels, systems or customer journey
• The effective measurement of the resultant improvements
  

4. Ownership of Responsibilities Across the Business

Good customer outcomes must be a shared responsibility across the entire organisation. It is not sufficient for risk and compliance teams to be the sole guardians of customer interests. 

From product design to post-sale support, everyone in the firm must understand and own their role in delivering positive customer outcomes. This collective responsibility ensures that customer-centricity is embedded in every function and decision, fostering a more cohesive approach to meeting the requirements of the Duty and putting customer needs first.

The commitment to the Consumer Duty must start at the top, and senior leadership teams and boards have a huge cultural role to play here. Setting clear expectations, modelling customer-centric behaviours and ensuring strategic decisions reflect a commitment to good customer outcomes (and are promoted within the business as such) are all key.

5. Aligning Incentives with Customer Outcomes

Staff incentivisation should be closely aligned with the aims of the Consumer Duty. Updating bonus structures / temporary incentives to reflect a commitment to good customer outcomes is essential. When employees are rewarded for behaviours and actions that enhance customer satisfaction and wellbeing, it reinforces the importance of these values and encourages consistent adherence. 

An example of this in action is ensuring that to qualify for any financial incentives relating to productivity, individuals must also exceed quality, compliance and / or customer satisfaction targets.

Let customers be your guide

When it comes to successfully embracing Consumer Duty, as granularly as your firm is thinking in the above areas (and inevitably, there will be a multitude of wider considerations specific to your business, too), compliance and success under the Duty is about the principle that the outcomes you want to deliver for your customers should guide every aspect of operational design.

By keeping this principle at the forefront, firms can build a culture that not only complies with regulatory expectations but also delivers exceptional value to their customers.