Hard data on customer retention, fee reviews and staff discipline are “key” elements that firms will need to monitor to demonstrate their practices are in line with the Financial Conduct Authority’s consumer duty code published today.
The city watchdog says: “A key part of the duty is that firms assess, test, understand and are able to evidence the outcomes their customers are receiving.”
The body, which launched a consultation on the code last December, says its guidance is designed to end rip-off charges, make switching easier, provide quicker customer support and make products easier to understand – particularly for vulnerable customers.
Among a number of features, the body says firms should keep customer retention records that include “claims and cancellation rates and details of why customers leave”.
Companies should be able to show data on the distribution, pricing, fees and charges of their products that include a “review of whether certain groups of customers are more likely to buy certain products, incur particular fees and charges, or appear to be receiving outcomes that are not as good as other groups of customers”.
It says that data on customer feedback should be formal and informal, including “complaints and comments made to the firm but also comments and complaints on social media”.
The body says that the number of complaints should be kept as well as their nature, which may demonstrate whether trends are forming.
It adds that complaints should be fully investigated “to understand the cause of customer complaints” rather than “just dealing with the symptoms”.
The regulator adds that firms should test the experiences of their customers through a variety of processes such as “mystery shopping, auditing customer journeys, focus groups and deep dives, or working with consumer organisations to gain insight into the needs and experiences of consumers”.
Staff training data should also be kept, including “remedial actions where staff knowledge or actions were found to be below expectations”.
However, the body adds that the type of information firms use to monitor how they serve their customers “will vary depending on their size, client base, and the types of products or services they offer”.
It says: “Firms should tailor the information to these factors, ensuring that they have sufficient information to be able to identify whether they are delivering good customer outcomes.”
The FCA will give firms 12 months to implement its new rules for all new and existing products and services that are currently on sale. It adds this code will be extended to closed book products 12 months later, to give firms more time to bring these older products, that are no longer on sale, up to the new standards.
FCA executive director of consumers and competition Sheldon Mills says: “The current economic climate means it’s more important than ever that consumers are able to make good financial decisions. The financial services industry needs to give people the support and information they need and put their customers first.
“The consumer duty will lead to a major shift in financial services and will promote competition and growth based on high standards. As the duty raises the bar for the firms we regulate, it will prevent some harm from happening and will make it easier for us to act quickly and assertively when we spot new problems.”