Consumer Duty – A question of Trust

Welcome to today’s session on consumer duty. Taking a closer look at the question of trust. Trust is a topic that we have visited in some of the earlier sessions, but today’s session takes a slightly different look and starts to ask questions. How we measure trust and how we can use this information to build better consumer outcomes. By understanding how we define trust and how it is connected to. Enabling us to produce good consumer outcomes, we will get a better understanding of the aims of consumer duty. Today’s session, we’re going to take a look at a model that has been created by a gentleman called Charles Feltman.

And use the four key component parts of measuring trust, and once we’ve done that, we understand how to monitor the trust scores and the steps that we can take to repair trust. If indeed that is necessary. Let’s remind ourselves of the key purpose of consumer duty, ranging from the idea to provide the highest standards of consumer protection. Whilst at the same time trying to increase the level of confidence that people show in financial services firms as well as provide a healthy platform for firms to compete against each other. The latest FCA announcement relating to the need for a consumer duty champion was given off the background of the government asking for ideas of how to unlock the economy and generate growth.

Although this is a small change, it doesn’t move away from the requirement that firms should take the requirement to monitor the consumer outcomes closely and challenge the figures that are actually there. We’re also told that whilst there might be a relaxation in this format. It doesn’t signify that there will be any further relaxation in the consumer duty rules, especially as the regulator might turn to these as a means to reducing the impact of other regulations. In the consultation paper on consumer duty, one of the pieces of evidence the FCA referred to was the Financial Life survey they picked up on the fact that only 10% of consumers strongly agreed.

That they had confidence in the UK Financial services industry. This is clearly damning for the industry itself and an area that the FCA want to improve. Although the regulations for consumer duty have only come into effect since 2023, there’s no recent financial lives data to call upon. What we do know is, prior to the introduction of the regulations. Things had improved slightly within financial services, but there’s still plenty of scope for improvement. In the consultation period for consumer duty, the FCA identified 4 areas. Their success measures that they were going to look for factual based evidence of improvement.

Now 3 of the areas the fair value, products and services and treatment of customers. Revolved around analysing complaints aspects such as products performing as expected, no unexpected charges, the ease of dealing with a firm when making changes to their products or services. The 4th area that the FCA wanted to measure was the improved confidence in financial services. So tools like the Financial Live survey would be continued to be used, but there must be other aspects that firms can think about themselves when it comes to supporting data to this end.

The FCA published the Consumer Duty Board reports good practise and areas for improvement report in December 2024. Within the report, the FCA said that they felt that firms had a good understanding of customer outcomes throughout the customer journey and but they were looking for improvements in a number of areas. They cited things like the analysis of different customer types throughout the customer journey, particularly those sewing signs of vulnerability. And also making sure that you had a flow of information up and down the distribution chain.

You’ve had clear action plans of things you were going to deal with in light of the information you were examining. They also said for smaller firms that they still need to think about how they can evidence the good consumer outcomes and may employ the services of a critical friend rather than. A consumer duty champion. It’s interesting to note that the relaxation of the consumer duty champion requirement. Was silent on the need for a critical friend. It might be that the firms who choose not to have a consumer duty champion anymore will turn to the services of such a person.

To help them keep on the straight and narrow, the other thing that the report did highlight was the FC. As expectations go a long way beyond the analysing of complaints and how firms link together pieces of information. ‘Cause analysis and actions that they need to take to make sure good consumer outcomes are maintained. Turning our attention now to good consumer outcomes, the report I referred to a moment ago on the good practise and areas for improvement flowing from board reports. Stated that the FCA felt that firms had a good handle on good consumer outcomes.

It’s worth reminding ourselves in the guidance, the final guidance that supported the consumer duty policy statement, the expectation of the FCA was that a firm should be able to define what good consumer outcomes look like. Over the short, medium and long term across all customer journeys, so quite a bit of work for firms to do, but it’s encouraging that the FCA is making positive noises in that respect. Most firms, when it comes to talking about consumer outcomes, will focus on making sure that the right products are being sold to the right people at the right time for the right reasons, performing as expected and enable.

People to make changes and contact support at a time and a place and a manner which is convenient to the customer. This is why that many firms focus their measures of consumer duty on these aspects. But what about must? Where does trust and measuring trust actually fit in to these? Measurements. Here is a model you would have seen if you have reviewed the other consumer duty videos in TC views. This is a model that I asked people to think about when it came to measuring the success of good consumer outcomes and consumer duty. To me, it all revolves around trust.

The idea is that you try to earn. The customers trust. Over doing the right things, you get or obtain the customer’s trust and then. Your aim is to retain or keep that customer’s trust through your ongoing support and actions. The idea of what a good consumer outcome might look like could vary between the regulator, the firm itself or customers, but firms have been left to their own devices to define exactly what that looks like. As far as they’re concerned. Here is a list of some of the things that customers might identify as being relevant to that good consumer outcome.

Whether the fact that it helps them achieve their goals or it’s easy to contact people when they need to speak to somebody. But the bottom of the list there is. The consumer trusts the firm. Let S think about that a little bit further. One of the things one of the challenges that we have to bear in mind is that trust, as we will soon discover, is not just a single metric. How easy is it to ask a customer? Do you trust us? What will the customer actually think? How would you think if somebody asked, do you trust me? Your immediate reaction might be 1 of suspicion, because why are they actually asking you this question?

I think it’s difficult to actually directly ask the one question. It’s rather blunt and it could upset the relationship with the customer. One of the other things using just one general question would make it very difficult to pinpoint the reasons why the level of trust has been affected. So what we can look at is how we can drill down into the potential root causes. The other thing of course, thinking about the list of what good consumer outcomes might look like, it’s very difficult to imagine a situation where the level of trust can be unaffected.

If you fail to deliver against the consumer outcomes that have been selected. As with the level of trust, the concept of earning the customers trust, getting the customer’s trust and keeping the customer’s trust will be affected. If you can’t maintain your performance levels as far as the customer is concerned. Having identified one of the challenges of working with consumer duty is how you go about measuring trust. I was interested to come across a book written by Charles Feltman called The Thin Book of Trust, and I thoroughly recommend it as a. Although this book is shaped to help individuals deal with relationships in the workplace on a one to one basis.

It does contain sections on how to manage the model that is introduced within a team basis, but it became very apparent that this particular model of trust. Be adapted for the use within the measurement of consumer duty. Let’s take a closer look. Let’s start off with a simple question. What is trust? Just spend a couple of moments thinking about how you would actually define trust, how we would actually define it for use within our measurement system is important. Let’s see what you come up with. In his book, Charles Feltman comes up with the definition of trust that is choosing to risk making something U value vulnerable to the actions of another person.

Such things that you might consider as valuable could be reward, such as your money job. Promotion or a particular goal, or a belief you hold a cherished way of doing things. Your good name could be something that is important, clearly, or it could be something your sense of happiness and well-being. All these aspects are things. That U value as an individual. The other thing to bear in mind is that trust itself is a competency and therefore it can be learned, but more importantly improve. Within Charles Feltman’s book The Thin Book of Trust, he uses 4 separate sections to measure the components of trust.

His trust assessment looks at care, sincerity, reliability, reliability, and competence. Each of which we will look at in turn, but together the combined 4 areas determines a person’s trustworthiness. The other benefit of using this particular model is that if the results indicate a lack of trust, it helps you to pinpoint the particular area within the trust model that isn’t working as expected. When we talk about care, it’s very much around the concept of doing things together. Regarded by Charles Feltman is probably the most important element of the four sections of the trust assessment.

The important thing is that you have the other person’s interests at heart as as well as your own when dealing and making decisions and taking action. It’s all about working carefully with the customer listening very, very carefully to what they have to say. They will share their values, hopes and dreams or concerns with you, but you have to make sure that your words and actions support the customer and not just you. It’s very much that when you make decisions or take action. Let people know that you understand how it affects them, even if the effect is adverse.

Don’t be afraid of giving negative news. Let’s look at a particular example. Jones sadly lost her husband Bob not so long ago. One of the sad tasks that Joan has to deal with is process the portfolio of investments left to her by her late husband, who was very keen and an avid investor, and took time and effort to put together a portfolio. Of investments. You take the time to let Joan explain to you what she’s trying to achieve and making sure you understand the reasons behind that, because many of her views are those expressed to her by her late husband.

You make sure that you take the steps to understand all the aspects of her portfolio and the choices that she’s able to make within that, even if it means that you’re not going to have the opportunity to generate some additional. Based work as a result of reshuffling the portfolio. You work very closely with John to make sure that she’s comfortable, and he even suggests that her son Gus, who’s based out in America, joins you in a zoom call that you can provide and provide reassurance both to Joan, of course, and to her son, Gus. That everything is working well.

This is a good example of care. So what question might we ask of someone when it comes to the level of care that we have provided? The first thing to note is in our example, we haven’t defined what we mean by care. We very much let the customer decide what that looks like. You may choose to provide some guidance as to what you understand “care” looks like, to see whether the customer agrees with that but leaving free reign gives you genuine feedback of how they’ve interpreted matters and it relates obviously to the trustworthiness of what goes on. So the question you could ask. Is based on the scale between 1:00 and 10:00, with 10 being the highest score. How would you rate the care we have shown in dealing with you? Now depending on the answer, of course, what you’re interested in, first of all is what were the main reasons for awarding this score so it could be things that you’ve done well which is attributed to the higher score.

Or things that have not gone so well and the the lower score, but the other thing to find out is what can you do if needed to improve. You’re interested in the feedback that will help build a stronger score. Care. The next section of the Truss model is sincerity. I mean, what I say, say what I mean and act accordingly. It’s important that there’s congruence between your words and your actions. You’ve got to make sure that you. Follow these things. How many times have you heard people say it’s not so important what they say? It’s what they do. This is a very telling statement.

Think the main thing is you have to ensure that you tell the truth as you see it at all times and you’re also consistent in your messages across different people in similar circumstances. You can’t deliver one message to one person and a different message to a person in a similar situation. That just doesn’t work, and it undermines trust. Let’s have a look at an example of sincerity. As a firm, you offer customers a review of their investments every 12 to 18 months, but you have become aware that in the recent weeks you’ve received several queries, not complaints, but queries.

About the delays in offering these particular reviews. It turns out that the root cause of some of the issues was the recent volatility in the market. So some customers have been in touch trying to get to speak to an advisor or a person about their portfolio sooner than. Anticipated timeline that you’ve got in your planning, you’ve still got the resources to offer these reviews, but have picked up on this event. So in order to deal with this request or these concerns quickly, you’ve arranged for a video update to be prepared by your investment team to provide a greater insight as to why the market has been fluctuating in the recent times.

But. With an underlying message that says with asset based investments like the ones they hold, this is something that’s normal and you would look for returns to be focused on the longer term. And asset bass based investments still works. Well, in order to deal with that, you do include an offer to create or contact the help desk to review your immediate concerns. Pending the review meeting and have arranged. For advisors to contact the customers that have raised concerns as a priority. Instead of just dealing with those that have raised the queries, you also arrange for a suitable version of the briefing video or the update to be sent to remaining customers who hold the same product or products.

It’s time to think about the question that we would ask in respect to sincerity. Rather than just ask customers about sincerity, it is open to a little bit of interpretation. So in this example, what we’re suggesting is that the question you ask. Is based on a scale between 1:00 and 10:00, with 10 being the highest score. How would you rate the sincerity in our words and actions we have shown in dealing with you this time? Of course we’re giving a little bit more guidance as to what we. Define by sincerity to make sure there’s consistency of understanding.

In a similar way, we ask for the main reasons why the customer awarded the score and the elements. Could do to improve if indeed we needed to. The third section of the trust assessment is reliability. You can count on me to deliver what I promise. It is so important to deliver the commitments that you make or the promises that you make. I’ll get that to you by the end of next week is a promise that you have to commit. And keep you make sure that you follow through all the actions that you’ve promised to take. But before you promise to do anything, make sure that you can actually do what is being asked.

If there’s any uncertainty about what you are being asked at this stage, make sure you seek clarification. And establish exactly your understanding is aligned with that of the customer. Always be clear about what you can do and what you can’t do within the time scales, but if you are having to go back and renegotiate a deadline that has been agreed, you must do that as soon as possible as soon as you are aware of it to make sure that you keep the trust between you and the customer. Let’s have a look at an example of reliability. One of the questions you’ll get asked regularly is, well, how soon will you be able to get those figures to me?

Now, rather than use a vague target like. Well, by this time next week, hoping to make sure that the the customer is happy with that answer, you know that in this particular example some of the figures that you need to provide the customer are coming from a department which is currently snowed under with work and. To be able to produce the necessary figures within the week that you are referring to. Rather than actually say to the customer, you’ll get the figures to them as soon as possible, you actually say to the customer that you will actually complete the piece of work and get the full answer to them by a date in two weeks time.

If they want some of the figures sooner, you can advise what you can actually deliver within the time scale. You can’t promise something that you know you will not be able to deliver if anything changes. Of course you can advise them. This way. Managing the time scales, you can ensure that the customer. Trust you in delivering what you say. You’re reliable. When it comes to asking your question on reliability within the trust assessment, it is relatively straightforward. People understand what reliability means and are quite happy to answer a question. So this time our question is based on the scale between 1:00 and 10:00.

With 10 being the highest score, how would you rate the reliability we have shown in dealing with you? In a similar way, we ask for reasons why the score has been awarded and what we can do to improve if needed. The final element of the trust assessment is competence. You know, I can do this, you know, if I can’t do this. It’s important that you have the ability or the customer thinks you have the ability to do what is asked and the understanding that should there be an area that you are uncertain of, you will make sure the customer is aware of that and that you will get back to them.

Either having referred to approach. Throughput technical resource or expert and or put them in touch with that particular individual. If that’s the case. Competence doesn’t mean you know everything, and it’s important that you are not afraid to admit when you need to seek assistance in resolving a question. Let’s have a look at an example of competence. Jack, our advisor is meeting a new customer. Now it’s important that Jack chooses not to set himself up as the expert and knows everything he outlines to the customer. His extensive experience and lays out a caveat that says if there is a question or an area where he doesn’t know.

He will tap into the technical expertise provided by his head office. Such reassurance is welcomed by the customer who appreciates Jack’s honesty in the situation. And knows that if there are questions that he doesn’t know the answer to, he will still get support and his issues resolved as a result. In this particular example. The relationship developed and the meeting ran very smoothly. When it comes to competence itself, what question can we ask? Well, again, we leave it up to the customer to determine whether or not the level of competence exhibited by the individual is what they expected by asking the question based on a scale between 1:00 and 10:00, with 10 being the highest score.

How would you rate our competence? We have shown in dealing with you that applies to every service of course received by the customer and we can make sure that we get the reasons why they’ve awarded that score and what can be done if necessary. To improve. Having looked at the four different sections of the trust assessment, let’s think how we might be able to use this approach within consumer duty. Effectively, the assessment revolves around 4 questions. We could choose to ask those questions through a questionnaire, either online or through the post, if necessary, or through conversation where we ask one of our representatives to make contact with the customer.

Clearly, if the customer is approached on a basis where they speak to someone, they might be a little bit more reserved in their opinions, their their feedback, and so therefore an online questionnaire is probably the best way of of dealing with that type of thing. But of course, not everybody has access to the Internet, but something you need to think about. As we’ve said all along, you ask the customers to ward up to 10 Marks and you find out the reasons why that those marks have been awarded and areas where you might. So you end up with four marks each out of 10, and the average of those marks represents your trust score.

Your level of trustworthiness. Here’s a quick example of what it might look like. You can see the four areas of the trust assessment and the average of the four marks awarded comes out to be 7.25. You need to decide whether or not that is a good score or something you would like to improve. What also comes across in this particular example is the lower score set within the competence section. One of the things to consider is how you might gather information to enable you to interrogate the information at different levels. One of the most obvious is the differentiation between new and existing customers.

The other thing you can factor in is vulnerability categories, whether it’s health, health. Which are conditions or illnesses that affect the ability to carry out day-to-day tasks, life events which are major life events such as bereavement or relationship breakdown, resilience, which is the low ability withstand financial or emotional shocks. Which is no knowledge of financial matters or low confidence. You can also include details of whether it’s a service, product or combination of the two. And the other thing to think about is depending on your setup, the type of firm is how you might manage the collection of this information and data.

At the lowest level, this could be managed through the development of something like an Excel spreadsheet, so it is something that could be used even by the smallest of firms. Here is an example of what we call the client trust matrix. A simple Excel spreadsheet. Showing carefully the details of the client, whether it’s a new or existing customer, a product service, or both, the vulnerability category and the scores that have been attributed within the trust assessment. At the same time, we’ve shown one flexibility is that based on the average ratings that have been awarded, we can colour code the spreadsheet red, amber or green and we’ve obviously highlighted in this example.

A score under competence of 7.67 is below what we would require for a green rating, which has been set at 8 for our example. So this would pinpoint areas we would need to investigate more fully. Just a couple of extra thoughts on the client trust matrix. It’s important to realise that you’re in charge of whatever the content looks like, so you can set your own categories that you want to measure, which will enable you to interrogate the end information. And I’ve already mentioned about the rag ratings that you can. And potentially you could add evidence.

The feedback from the customer as a note within the spreadsheet. So for instance, under the competence section where you had a six, you could actually add as a note the feedback received from the customer. That pinpoints the areas that they had which were not quite to the expected standard. The introduction of the measurement of a trust assessment might be new to you, and you might be thinking about, well, that’s all well and good, but how do we integrate that with our existing approaches? Essentially what we’re looking at is adding four questions to your approach of gathering customer feedback your.

Questions at the moment might relate around the successful customer outcomes, but these measures at the end of the day will provide an insight into the level of trustworthiness. You can then obviously incorporate the results in any management reporting that you’re doing. Through the board report to make sure and highlight how you’re developing confidence in the products and services you provide. It’s worth mentioning at this stage that only by changing what you say and how you act. Can affect how others assess your trustworthiness. You’ve got to commit to doing things differently if you’re receiving feedback that suggests the customers are unhappy with the level of support they are receiving from you.

It’s worth mentioning at this stage that sometimes trust is broken. Is it possible you can actually repair trust? Well, the answer is yes, but it doesn’t happen overnight. I think you and your customers share a mutual goal that you’re looking to trust each other and from your point of view, you need to understand which element of the trust assessment has been broken and what evidence has actually been used to confirm that. If you wish to investigate this with the customer, it is so important that you listen to what they have to say and you’re honest in your responses.

You need to understand what it is that you need to do to repair or regain the customers trust. And you have to commit yourself to making sure that you make those changes. Don’t forget part of the trust model measures how effective you are in that department. Thank you for watching this presentation. I hope that you’re inspired to re examine the way in which you measure the success of consumer duty within. Questions that support the trust assessment or of your customers and seek this as a way to add to the reporting on your consumer duty.