Consumer Duty: FCA New Consultation Commandment

Written on
byJames Gallagher

The Golden Rule. It’s taught on our first day of school – treat others as you would like to be treated. This fundamental and central principle to living in society is the driving force behind the FCA’s Consumer Duty consultation paper. Sparked by the FCA’s 2020 Financial Lives Survey which highlights that only 35% of respondents believe that FS firms are honest and transparent. The FCA is not calling FS firms barbarians but heralds that their duty to customers should be taken to a higher level of expectation.


In their opening lines, the FCA calls forth this higher expectation. “We want to see a higher level of consumer protection in retail financial markets, where firms are competing vigorously in the interests of consumers… For many firms, this would require a significant shift in culture and behaviour”. This quotation should be broken into two parts. First, vigorous competition means firms should be placing customer service as a top priority in competition differentiation. Secondly, a significant shift will require a renewal of FS firms culture – that even if already benevolent – has to be taken to a higher level of care.


The FCA has brought to the fore what it calls “sludge” practises – deeds firms take to intentionally slow down customers from taking actions the firm does not want them to – like leaving for a competitor. They differentiate this to friction processes such as “cooling off” periods or fraudulent checking that while slow can be in the best interest of all parties. While there are some malevolent firms that do intend to manipulate customers, there are many who are only guilty of being lackluster in their full customer lifecycle service. Of course a firm will focus and pay particular attention to customer service when onboarding a customer, that is how they get sales after all. What the FCA wants is better concentration and action on the full customer lifecycle service and experience. 


Many of you will be familiar with the government’s so-called “Nudge” department (or, as they are officially known – the Behavioural Insights Team). They use the techniques covered in the Nobel prize winning economists book, by the same name, on how to incentivize individuals by small changes such as framing of information. To make the example personal I shall share an experience I had recently that shows what companies may do. 


We all get thousands of emails a day – even when we click the no marketing information checkbox! From one specific company I had 6 emails in a month, which although is not tremendous, when we consider the amount of products and services we consume – it soon adds up. Furthermore, many of these emails do not need to be read – woe to the amount of emails I receive giving me my monthly bill in the age of subscription price modeling. The situation itself is a common one, my 18 month contract bill was now going to increase. Again, nothing unusual or unethical, it’s a very normal contract. The subject heading I received in my email read “A little reminder about your contract”. Now yes this is objectively true, one part of my contract was about to change. I was going to pay more for the same service. But how innocent does the phrase sound compared to “Remember your contract is changing”. All of a sudden this now seems something more demanding that needs action. Or, finally what if it was just plain and simple “Your bill is increasing”.


You see from the example above the firm did not really do anything wrong, particularly from a legal standpoint. But they were also not clear with me, which led me to pay double what I could have paid at any other provider for 3 months before I even noticed. The worst part is I was an economics and finance student! I understand nudge theory and how to properly manage money, but even I fell victim – so what chance does a vulnerable customer have?


In all our relationships whether with friends or FS firms we want clear communication that does not intentionally omit important context. The Consumer Duty Consultation Paper speaks to 4 different areas of what businesses need to treat customers fairly.


Communications: Originally Principal 7 which deals with communication thought that the provision of information would cause consumers to consider it all thoroughly. However, they now know many are constrained in comprehension and so the focus changes to what is the outcome for the customer. If a firm is aware that an individual may have a better option they must make it clear without overloading and misleading customers.


Products & Services: These products are tailored for the best outcome for the consumer. This must be done in: needs; products should be designed for usage (like the phone contract with a million minutes of calls that would never be used), biases; take into consideration trends in irrational behaviour (taking on more credit than one can pay back), actions; allow customers to easily act (allowing customers to change contracts or providers).


Customer Service: Firms should provide customer service that meets the needs of the consumer in a way that is focused on the outcomes of the consumer. If the consumer needs help to understand, make changes or move to another service then this should be aided.


Price & Value: Prices should be set on the value that the service and/or products give to the outcome of the individual. Although the FCA will not necessarily be price makers, they should overview that comprehensive and reasonable pricing methodologies were and continue to be utilised by the firm.


We here at Aveni take our consumer duty seriously. We offer a bespoke solution to using AI when it comes to customer service call monitoring and speech analytics. Naturally the solution of each firm and its products are different which requires specialised solutions yet many in the industry use off the shelf methods that simply do not meet the needs of our clients’ customers.


If you want to provide a quality service to your customers then you need to be able to listen to them. Using NLP and AI technology to highlight the needs and vulnerabilities of 100% of customer contact will let you know what you need to do. Remember it is about understanding the outcomes for your customers and the only way you can know what is best for your customer is by listening to them yourself.


Want to learn more about how our market-leading AI and speech technology can help you fulfil your consumer duty requirements?  Click here 

Learn more about what we do. Visit Aveni Detect

Other recent posts

Podcast logos-03

AI’ll Take Your Job

Join Joseph Twigg and Jamie Hunter, the dynamic duo of financial services and AI, as they unleash their wit and wisdom on the game-changing influence of recent AI development on the industry.  

Replay social 2-06

An Introduction to ChatGPT in Financial Advice

Our CEO Joseph Twigg was joined by Iria Del Rio, our lead NLP engineer to talk about the explosive rise of ChatGPT and other large language models, what got us here and what this...

Three confident business people having discussion while working in the office together

Beyond the basics: Debunking common QA assumptions in financial services

Quality assurance (QA) is a critical business function, ensuring that products and services are compliant with regulation and meet customer needs. However, there are some common assumptions about QA within the financial services industry...

Board member and FCA proposal

Aveni partners with Delta Capita to power their Consumer Duty offering

Aveni has partnered with Delta Capita, a leading global capital markets consulting, managed services and technology provider, to advance their Consumer Duty offering by providing their clients with access to our cutting edge AI...

limitation of ChatGPT in financial services

Limitations of adopting chatGPT and other large language models in the financial services industry

There has recently been a lot of hype surrounding ChatGPT, and other large language models (LLM’s) and rightly so. Their extensive capabilities make them impactful for a wide range of use cases across various...

It pays to plan properly for the future. Cropped shot of a senior couple getting advice from their financial consultant.

Age Partnership selects Aveni Detect platform to enhance customer outcomes and mitigate risks, has been selected by Age Partnership, one of the UK’s leading Equity Release Advisory firms, to revolutionise its Quality Assurance systems setting new standards for customer service and outcomes.     Following a successful...


Demonstrating Consumer Duty Compliance with Technology - Key Takeaways from Aveni’s recent webinar

In our latest Consumer Duty webinar series,”Demonstrating Consumer Duty Compliance with Technology,” Joseph Twigg, CEO of Aveni, sat down with John Liver, Strategic Adviser at Kore and NED at Barclays, and Alan Blanchard, Head...

Aveni SPW

Schroders Personal Wealth adopts AI-based Aveni Detect platform to transform compliance function

Aveni, has been selected by Schroders Personal Wealth (SPW) to transform its compliance function. Through the deployment of the Aveni Detect platform SPW will use the latest advances in Natural Language Processing (NLP) to...


Human in the loop 101: what is it and why is it so important?

Financial services firms have been turning to Natural Language Processing (NLP) solutions to extract valuable insights from vast amounts of unstructured data. But even the most advanced algorithms can’t match the intuition and creativity...