What the FCA wants to see on client comms

Alan Hughes

The FCA has recently published a paper on smarter consumer communications (FS16/10). It pulls together feedback on various issues around communicating information to consumers in a way that is compliant but also more engaging and relevant than is the case currently.

It does not contain any proposed new rules or policy but it does signpost some future work by the FCA (which looks very positive) and highlights approaches deemed to be leading the way in this area.

The paper covers a diverse range of products and services within the FCA’s remit. However, there are a few key themes firms should take note of:

  • The FCA is clearly aware that firms tend towards overprovision of information in order to reduce the risk of complaints and claims. However, this can have the opposite effect to that desired. The most important information is hard for the consumer to discern, meaning they can generally disengage with all of the details provided.
  • One approach the FCA encourages to address this is the provision of information in layers: i.e. headlining the most important bit first. This seems to be a sensible and achievable approach.
  • The FCA is also aware its rules can be perceived to prevent innovation, as they are deliberately media neutral. It agrees to look at this in various ways, which is encouraging. However, it pushes back fairly firmly on what it sees as an implicit suggestion that the rules on financial promotions and risk warnings, for example, should be relaxed for social media and other forms of abbreviated communications. It is clear the regulator does not intend to stray far from its core principle of treating customers fairly on this issue, although it is prepared to engage on how new approaches may be adopted that are consistent with that principle.
  • Many of the FCA’s positions in FS16/10 appear to be backed up by research into consumer behaviour. It is good to see it listening to firms’ views properly and basing responses and proposals on evidence as to how consumers generally behave.
  • The examples of good practice on smarter communications are really worth reading. Even though some are very product/service specific, it is often possible to draw high level conclusions that would apply across the sector.

Overall, I am greatly encouraged by the approach outlined in FS16/10. The FCA is genuinely engaging with firms and other stakeholders on this issue, and appears to want to make real progress in helping increase consumers’ understanding of what they are buying. And that can only be a good thing: a better understanding increases satisfaction and should reduce claims and complaints.

There are lessons for the legal sector (and indeed the professional services sector generally) in FS16/10. Like the financial services sector, my sector can be guilty of information overload when engaging with clients, driven by our own regulatory obligations and desire to avoid the risk of claims. While this usually starts from a good place of wanting to be as transparent as possible, the amount of information provided can have the opposite effect. We too are continually reviewing how we engage with clients and trying to do it better. Sound familiar?

Finally, when designing information to be disclosed to consumers it is often a good idea to “road test” it on what you see as your target audience. This can be as simple as asking a friend who is not particularly familiar with financial services for their opinion on the information you would be looking to disclose.

Does it get your key messages across? Were they bored before they reached the end? What were the three key things they took away from reading it?

You may not like the all feedback that you get but it could be very constructive and help shape your future approach.

Alan Hughes is partner at Foot Anstey LLP 

Recommended

Is Workie working? TPR figures cast doubt on £44m auto-enrol comms campaign

Experts have questioned the effectiveness of the Government’s £44m auto-enrolment ‘Workie’ communications campaign after figures from The Pensions Regulator revealed less than a quarter of employers have been encouraged to act by the adverts. The Workie campaign was unveiled by the Department for Work and Pensions in October. Although the DWP initially said it would […]

4

MPs attack Govt over ‘confused’ state pension comms

MPs have called for urgent reform of state pension statements after an inquiry found that confusion was “rife” about how the new state pension affected those reaching retirement age. The Work and Pensions committee has published a report today which says it is clear that the new state pension, which replaces the basic and additional […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. So getting a bureaucrat to tell you how to communicate simply and effectively is somewhat like being told how to play the violin by an all in wrestler.

  2. Sounds great, but same old problem. FOS.

  3. I do sit and wonder (with regards to the regulator) when will the penny drop, it kind of reminds me of the sea side arcade game when you insert your 2p for it to drop and land flat and in turn be pushed by the moving platform so it can push the other 2p’s over the edge into the basket below.

    But like the game, a certain amount of glue is involved to stop this !

    Take this article, the FCA really need to address their very own, communication “over provision” take the rule book and its sea of “cobs” rules, guidance from the endless thematic reviews etc etc etc to simply say “you interpret the rules wrongly, is akin to a firm saying the warning sign was in the literature, you miss it or fail to underestimate the risk….. on your head be it. The problem is we are held accountable the FCA is not !

    You (FCA) want to cut down on paperwork (I whole heartily agree with you), reports and communications you have to make your very own rules practical, and as simplistic as possible……. will the penny drop ?

  4. As I was browsing the Daily Mail through sheer boredom – well looking at the back page sports headlines I noticed an advertisement (guide) for releasing equity from your home. All positives but nowhere did it explain possible risks nor whether the advertiser was authorise or regulated to work within this market. It may have been compliant but IMHO it failed the acid test of fairness – there is still some work to do and the FCA should assist.

  5. A person prone to renegade thinking might conclude:

    Just do the business with your client verbally. Don’t give them all the guff that they don’t understand or care for. Everyone reading this knows FACT that the ombudsman will shoe horn his required outcome into a situation riding coach and horses through any suitability reports – made more insulting where an IFA firm he nos right to challenge the outcome in Court. If the client complains (usually re-creating history inspite of any paper records) all trust is lost. Settle the claim yourself and think of all the hours you’ve saved compiling concise 100 page suitability reports.

    Seriously Though – It is impossible to be concise. Key facts. Terms and conditions. Personal illustration. Risk analysis. Suitability confirmation report and then the fund selection report with all the Kiids.
    Having now dealt with your ISA contribution please continue to read the report relating to your pension contribution – and on it goes !!!!

    If anyone knows how to this concisely I’d be all ears!!

  6. The paper ignores the basic fact that customer contact data is often poor with out of date details. Identifying and tracing “gone away” customers before you even try to communicate is an essential starting point.

Leave a comment