UK Consumer Duty: Why you can’t afford to be unprepared

By: Adele Gray

06/12/2022

In our recent article The FCA plan to take Consumer Duty seriously….and you should too, we mentioned how in a recent speech made at the PFS’s Festival of Financial Planning, Therese Chambers, Director of Consumer Investments at the FCA, made it very clear that the FCA will be taking the enforcement of the New Consumer Duty rules very seriously and that firms must prepare very carefully for the implementation in January 2023.

The Stakes are high

During the latest quarterly wave of our Retail Consumer Interest Study we asked 304 respondents about the total amount of money they had to invest:

Source: Research in Finance Retail Customer Interests Study Wave 9, April 22

As you see, the average amount to invest has increased to above pre-pandemic levels, demonstrating that there is still a large amount of money available for managing. Firms cannot afford to rest on their laurels if they want to be considered and competition will surely increase as asset managers race to become consumer duty compliant.

Clarify your communications

The overarching principle under the new consumer duty rules requires that “firms act to deliver good outcomes for retail clients” and client communications will be a key focus under the new rules.

Firms will no longer be able to produce wordy and obscure communications. The FCA wants customers to not only be given the information they need, but the information that they need at the right time and presented in a way that they can understand. The FCA has stated that the new Principle will require firms to:

• Support consumer understanding by ensuring that their communications meet the information needs of retail customers
• Ensure communication is clear, fair and not misleading
• Communications are tailored to take account of the characteristics of the customer (including vulnerability)
• Ensure that information is accurate, relevant and provided on a timely basis
• Communications should be checked for customer understanding
• Communications are tested monitored and adapted to support good outcomes for retail clients

How Research in Finance can help

In 2013 Research in Finance launched a study designed to provide asset managers with a deeper understanding of end consumer motivation when investing. This was in direct response to the FCA’s implementation of its Retail Distribution Review. Ten years on this study has continually evolved to meet the needs of asset managers and is perfectly positioned to support the new FCA Consumer Duty requirements.

Here at RiF we can help with consumer understanding in several ways:

• We conduct an in-depth annual survey of private investors, designed to gain a deeper understanding of retail consumer investment motivation.
• We offer a community component for asset managers to test their marcomms material amongst private investors, ensuring suitability for all consumers.
• We can look at the understanding of key documents, websites, factsheets, and communications and can provide consumer feedback, along with recommendations for enhancements.

Below is an example of the sort of information we are able to glean from our refined consumer panel, giving asset managers an exclusive insight into the sort of information investors look to base their investment decisions on:

Source: Research in Finance Retail Customer Interests Study Wave 9, April 22

In good company

We have already begun work with some of the world’s largest asset managers, including Allianz Global Investors, Artemis, BlackRock, Columbia Threadneedle, Janus Henderson, JP Morgan, Liontrust and Schroders, supporting them as they work to meet the new regulation. The working group will collaborate to create an industry standard solution, giving our clients the security of knowing they are fully prepared for and complying with the consumer duty rules, as well as doing the best they can by their investors.

The rules need to be met within a short timeframe (firms with open products and services must action their plans by the end of July 2023, those with closed books have until July 2024) however it is not too late to ensure you are well prepared to meet the new regulation. Research in Finance are here to support you as you plan and implement your response to the new Consumer Duty.

To find out more about how we can help with your Consumer Duty requirements, please get in touch with Mick Hrabe or Richard Ley. You can also call us on +44 (20) 7104 2235.