Raising the bar for commercial benefit and Consumer Duty success

This year promises to be a pivotal year for firms as they continue to embed Consumer Duty (CD). Let me explain my thinking. Firstly, it will soon be two years from the introduction of the regulation. As such, firms have had time live with CD and their revised approaches, working out which ones are really helping to deliver better outcomes for consumers and those which are proving to be of only marginal value. Consequently, they should now be beginning to understand the cost-benefit of these changes. Overlaid on this is the, still emerging, but the clear message from the FCA (as evidenced in their two most recent surveys 1) that whilst many firms are doing some good things, many firms are either not doing enough or, worse, trying to reduce CD to the minimalist. i.e. ‘tick-box’, approach taken in the past of doing ‘just enough’ to avoid sanction. The regulator has said on multiple occasions that CD is not a ‘once and done’ activity and that, at its core, CD requires a cultural shift in the industry. In that context, 2025 promises to be a key year for firms as they embed CD.

If 2025 promises to be a key year for firms, it also promises to be a challenging year for the regulator as it tries to navigate a government who is desperate to kick-start growth and sees regulation and red tape as a major impediment to growth. Whether that is true or not, the Chancellor has the FCA firmly ‘in her sights’, as evidenced by the recent meeting between Rachel Reeves and the heads of leading regulators in which she gave them a clear message about the need to support growth, not tie firms up in a plethora of red tape. For financial services in particular, the Chancellor’s sentiments are echoed by many parts of the industry, e.g. the speech last December by Charlie Nunn (CEO of Lloyds Banking Group).

The result would put compliance teams alongside the business in support of commercial objectives, rather than being seen as an impediment. Change indeed!

For firms, these two contrasting pressures create a potential dilemma. For some firms, I suspect the current tensions between the government and the FCA will not affect their pursuit of better consumer outcomes. These firms will continue to focus on CD; mining their MI for the learnings that will steer them to make the operational improvements that generate greatest improvement in customer outcomes. By contrast, the firms who have a track record of doing the minimum required to just stay compliant will see the current situation as an opportunity to step back and save the time and money they would otherwise have had to invest to comply with CD. They will sit back and wait hoping the regulator scales back on the standards it has set for CD. ‘Happy days’ you can hear them say!

However, I believe the firms who typically adopt the minimalist approach to regulation, and who are encouraged by the government’s recent overtures to the FCA, are missing a significant opportunity and let me explain why I think that’s the case.

In my article in the January edition of T&C News, I argued there is a strong commercial argument for investing in activities which improve customers’ experience of the company throughout their life span with the company. The evidence underpinning my argument, should cause even the most diehard of minimalist firms pause and reconsider their approach, not because it satisfies the FCA, but because it makes good commercial sense. However, my January article did not go further and suggest how firms can go about building improved customer experience which would both improve business benefit and demonstrate a seriousness about providing better outcomes for customers.

In my view, one of the approaches that offers greatest opportunity to improve customer experience is ‘hiding in plain sight’, that being T&C. I suspect many of you are thinking: “Come on, really? T&C has been around forever and hasn’t made that much difference”. But before switch off, let me give the “case for the defence”.

When I’m talking about T&C, I don’t mean the specific regimes that have been used for years for the communities specified in the TC Rulebook. Rather I mean taking the principles and disciplines that T&C requires of its participants and applying it to the range of groups that interface with customers throughout their lifecycle, e.g. contact centre agents, complaint handlers etc.

I believe there are 6 reasons why firms should seriously consider extending the disciplines used in T&C schemes to all customer facing parts of their business.

T&C Is Known and Proven: As a long-established regulatory process, with a proven track record of both developing staff and reducing the firm’s regulatory risk, typically mis-selling, T&C disciplines are known and understood. Consequently, firms could use their experience of T&C to implement a T&C style set of processes for all customer facing groups.
T&C Is Disciplined: T&C schemes are structured and go to a level of detail not seen in other people processes, e.g. PDR / appraisal schemes. T&C schemes contain a set series of activities from 1:1s to observations, and these need to be conducted on a regular (scheduled) basis. And whilst I’m not necessarily arguing for the detail required of formal T&C schemes, the rhythm of regular, documented activities would be invaluable.
T&C Provides ‘Outside In’ Data: ‘T&C provides an internal measure of performance’, I can hear people saying. That’s true in part, but if you take observation activities, these are where the supervisor is a ‘fly on the wall’ to a discussion between the adviser or agent and the customer. The supervisor can hear and sometimes see what is happening. And because they are observing a customer interaction, they can record real data from outside the company. And that is the rich, qualitative data the regulator is saying it wants to see more of in their reviews of firms’ CD dashboards.
T&C Is Perfect For Coaching: Because T&C uses real world data / examples, e.g. customer observations, T&C provides a perfect platform for coaching the complaint handler or agent. As such, T&C discussions are the perfect time to coach the CD related behaviours which lead to better outcomes.
Development Actions: Another core discipline in T&C is the notion of corrective or development actions. T&C schemes require any behaviour that is less than acceptable to have a clear, time bounded action plan which is both documented and subsequently reviewed. The consequence of this is not only do adviser / agent behaviours change and grow, these plans also provide another set of data which demonstrate a firm’s desire to change and improve in its pursuit of good outcomes.

(Again, the lack of evidence of action plans for improvement was a clear finding from the FCA’s recent reviews of implementing CD).

Culture: At its core, the FCA has repeatedly talked about culture being the key factor that drives customer outcomes. And because the FCA describes culture as the ‘habitual behaviours and mindsets that characterise an organisation’, the evidence provided by T&C style processes is an undeniable source of a desire to develop a customer centric culture.

Extending T&C methodologies and disciplines across all customer-facing staff may appear onerous but it is a great way of developing and embedding the customer centric culture demanded by CD. Of course, firms may wish to adapt traditional T&C practices, choosing a slightly lighter touch. However, firms need to be careful that they don’t dilute the practices so much, they lose their value.

Above all, my suggestions about a wider application of T&C principles across all customer-facing groups would replace the perennial ‘do what’s right’ versus ‘do the minimum’ regulatory debate with a ‘how to gain maximum commercial benefit’ argument. The result would put compliance teams alongside the business in support of commercial objectives, rather than being seen as an impediment. Change indeed!

So perhaps, adopting T&C style processes across a business could bring all firms together in unlocking a future approach that satisfies both the business and the regulator.