... it's about the customer, too.
What's a lil' old Leeds digital marketing agency, doing talking about how Consumer Duty affects the customer? Well, as the new legislation seeks to improve outcomes for consumers, we thought, why not do the same.
Of course, if you're in financial services marketing and want to know how it affects you and how you can still create marketing impact, you can download our free report here.
Right, back to consumers ...
From today (31 July 2023), as The Guardian states: "UK retail financial services set for biggest overhaul in 20 years."
That's quite the claim. But as a marketing agency with Financial Services expertise, we know as well as anyone, that has good and maybe not-so-good implications for consumers. Here's the low down starting with the good ...
Under the new regs, financial services companies must give customers useful information and deliver products that meet their expectations.
If dissatisfied, customers should have the same ease in switching or terminating accounts and services as they did while making the purchase. A spokesperson from the campaign group Which? advises consumers to, "Directly raise complaints with the company if they observe any deviation from these new standards."
With companies being held to a higher standard, customers can refer to the 'Consumer Duty' when making complaints about non-compliance with the new rules and they can do it with more confidence than ever before.
And quite right, too! Under the new regs, companies are prohibited from imposing 'unjustified' fees which are disproportionate to the returns. Therefore, customers should not face exorbitant charges to maintain an account that fails to yield profits.
In a recent speech, Sheldon Mills, Executive Director of Consumers and Competition at the FCA, highlighted the importance of customers being able to invest in their future with confidence, knowing that companies are providing them with products tailored to their specific requirements.
As recently as last year, the City watchdog prohibited the 'loyalty penalty,' a cunning pricing strategy employed by some major insurers, which involved charging existing customers more than new ones to attract new business.
Today's guidance compels insurers to disclose their premium calculation methods. This will ensure the rates offered provide 'fair value' and do not exploit vulnerable customers or those with low incomes.
Customers will also get greater clarity during claims, as insurers will be required to give customers a suitable reason for claim denials.
However, concerns arise as insurers seem to be falling short of these standards just days before they take effect.
Research by Which? reveals that over three in four car insurance customers in the UK reported their providers failing to explain claim rejections, partial acceptances, or disputes.
This historical lack of explanation has hindered drivers from challenging claim decisions or filing complaints with the Financial Ombudsman Service—but that should now change as consumers will now be more empowered.
It can't go unmentioned that some high street banks have faced criticism for not passing on higher savings rates to customers. However, the new guidance mandates banks to provide customers with 'fair value' and justify their rates, or face penalties.
Not only that, banks will be required to notify savers of better interest rates, ensuring that more individuals become aware of the possibility of their money remaining in accounts with meagre returns.
To facilitate easier account switching, the plans also aim to ensure that exit fees on fixed-term savings products are reasonable and proportional.
Several banks and building societies have already made adjustments to comply with the new rules. Which, as an FS marketing agency, we think is not just great for consumers, but it's a great tac to take for FS brands, too.
Ok, but what about the not-so-good?
Glad you asked, here goes ...
Now for the bitter pill amongst all that retail financial sweetness. Financial advice costs may increase due to the additional workload placed on advisers and brokers by Consumer Duty.
Research conducted this year by investment firm Quilter revealed that nearly half (44 percent) of advisers anticipate earning less money as a result of the Consumer Duty. Furthermore, almost a third (32 percent) expect to raise their fees as a result.
The TLDR summary:
Now, if you're a financial services marketing professional, all the above information, a window into what it means for consumers, will be very useful to you, too and goes very nicely with Creode's free report on creating marketing impact through the Consumer Duty lens. Download it, here.