The impact of Consumer Duty on marketers
If you’re a financial services brand, a marketer working in the financial services sector, or part of an agency client service team with financial services’ clients, you’ll no doubt be familiar with the new Financial Conduct Authority (FCA) Consumer Duty legislation. It came into effect at the end of July this year. It’s set to shake up the financial services sector and have a profound impact on marketing communications specifically.
The new Consumer Duty
The primary focus of the new legislation is to help ensure transactions between businesses and their consumers are fair and ethical. Keeping it simple, Consumer Duty rules can be broken down into four key elements:
- The governance of products and services
- Price and value
- Consumer understanding
- Consumer support
Together, these ensure that financial institutions consistently provide consumers with products and services that meet their needs at a fair value, clear and understandable communication at all stages of the customer journey and helpful customer support as and when they need it.
It’s not just about consumers though. Consumer Duty is a reciprocal agreement. Whilst it’s designed to help protect consumers when they’re purchasing or interacting with products and services, consumers also have responsibility to businesses. And that’s to engage in fair and responsible behaviour such as paying within agreed timescales and using and disposing of products in a responsible way. It’s a balance that helps to maintain a healthy, ethical marketplace, which in theory, can only be good thing.
How to implement the new rules
Marketers are at the front line. They will be instrumental in advising clients and colleagues in financial institutions how best to implement the new FCA rules. Plus, they’ll help review and updating exist communications to ensure compliance. On an on-going basis, it will be a marketers job to act as gatekeeper. They’ll ensure any new marketing communications that leave the business meet, or exceed, Consumer Duty standards. It will be paramount to have a comprehensive understanding of the customer journey from the initial touchpoint to the final transaction as part of the implementation phase.
It’ll be vital for marketing teams to perform a detailed analysis of customer engagement, acquisition and retention figures, along with review and complaints data, as this will help to determine if their products and services are meeting customers’ needs and could identify areas where improvements need to be made.
Putting Consumer Duty into practice
- Perform a comprehensive review of all existing marketing communications. Identify any that may be non-compliant, and update these ensure greater clarity and transparency.
- Ensure all new communications are designed to help customers make decisions that are in their best interest. Consistently provide unbiased information and advice.
- Offer products and services that benefit your key consumers, ensuring they deliver fair value. Make sure terms and conditions are easy to interpret and understand, and free from ambiguity.
- Provide helpful and accessible customer support. Make it easy to sort out problems, switch or cancel products or services.
- Consider if customers are in vulnerable situations – and accommodate them. This could be by ensuring communications are provided in accessible formats. For example, large print, braille, subtitles for films etc.
Aren’t marketers doing this already?
You might be reading this and thinking, haven’t marketers been banging the drum for customer-centric marketing for years? And you’d be right. A marketer’s role is to ensure that they’re delivering products and services built with the consumer in mind. These should be delivered at the right price, at the right time and distributed in a way that makes it easy for the consumer to access them. We all know that pushing products and services to consumers that they don’t need, or want, isn’t good for building a successful brand, regardless of whether it’s legal or not.
So, what will the impact be?
It’s disappointing that the financial services sector wasn’t able to self-regulate anyway. They should have provided consumers with fair deals and objective advice in the first place, even with the rise of challenger brands. But we are where we are and given the cost-of-living crisis, and the unwillingness of big financial institutions to change the way they do business. So, Consumer Duty may be a necessary evil in order to force positive change.
Some financial brands may argue that these regulations will just add to the regulatory burden. It could add an extra layer of complexity to compliance procedures for something that they’re already doing. However, we know that not all financial brands have a strong ethical compass. The regulation can’t be applied to just a select few, it has to be applied across the board. Given the potential regulatory penalties, non-compliance could result in reputational damage for brand, ultimately affecting their bottom line, so no financial institution can afford to ignore Consumer Duty.
Increase ethical business practices
Others argue that these regulations are a positive move as they will lead to better consumer outcomes and more ethical business practices. These, in turn, are likely to drive deeper consumer loyalty. In theory, Consumer Duty should elevate the standards of the financial services sector and foster a more ethical and customer-oriented approach to marketing. As it will also ensure industry-wide consistency, consumers can expect a higher level of care and support. The result of these changes should therefore allow financial institutions to build, or rebuild in some cases, positive brand equity. Their consumers should quickly turn in to advocates. Assuming all businesses up their game and become more customer-centric, where does this leave businesses, like John Lewis, that use it as their point of difference?
Giving marketers more influence
In the end, it really shouldn’t take a regulator to force what is basically good business practice. What Consumer Duty may do, however, is give marketers more influence in the business they work in. It’ll ensure a marketing strategy is not solely determined by sales targets but by providing consumers with products and services that meet their needs. In the short-term it may create more work for marketers and agencies thought. They’ll need to immerse themselves in the new regulations and develop new solutions to ensure compliance. In the longer-term Consumer Duty should lead to a step-change where the customer well and truly comes first. Just as they should do.
Get in touch
As an award-winning creative marketing agency with a strong background in financial services, we can help you navigate Consumer Duty and create customer-centric marketing communication. If you’d like some impartial advice, or if you need support with a creative marketing project, get in touch today.
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