Consumer Duty: Measuring & managing outcomes


Guy Broad

Guy Broad

Financial Services Consulting Senior Manager


More than just compliance, ensuring good customer outcomes is a powerful way for firms to differentiate their brand in a crowded marketplace.  As customers actively seek out organisations who share their values, good outcomes can create a real competitive advantage.

But are firms grasping this opportunity?

Why do many get mired in specific metrics or RAG statuses?  Can firms see the wood for the trees? Are they measuring the right things in the first place?

The next six months will tell.  By July 2024, Boards must assess how well their firm is delivering customer outcomes, reflecting upon available data and monitoring undertaken.  What story will this assessment report reveal?

What is outcome monitoring?

Firms should fully understand how well they deliver good customer outcomes.  Insightful touchpoints across end-to-end customer journey stages should identify potential for foreseeable harm and validate the customer outcome. 

Measurement should be from the customer’s perspective, not just reflecting a firm’s own operational and commercial interests.  Analysing cohorts (rather than individual customers) is a pragmatic way to surface variances within the overall customer base.  And in aggregate, firms should oversee all products and services offered, including those delivered via third parties.

Good examples of measures used to determine outcomes include the percentage of cases not meeting standards for responsible lending, arrears-handling, vulnerable customer treatment, or complaint handling.  The use of unapproved overdrafts.  Complaints received about advice or financial promotions.  The availability of online services.  The number of services only available through one channel.

Other measures need more caution.  For example, customer satisfaction provides some context but does not necessarily talk to good outcomes.  Call answer rates indicate timely response-handling but not the quality of the conversation.

For outcome monitoring, quality is more important than quantity.

Why are outcomes important?

A picture of customer outcomes is important to demonstrate Consumer Duty compliance, and which should inform Boards in their first annual assessment report, due July 2024 – a key milestone.

However, monitoring is just the start.  By developing the skills to analyse and challenge, the most customer-centric firms will see a broader opportunity for proactively managing outcomes – to act, track impact, and continuously improve.

Why?

Customers should be more certain of receiving value for money (especially over the long run), better informed about the complexities of financial services, and ultimately more trusting of their provider.

The regulator will be more convinced that firms understand and act in their customers’ best interests, with less need to intervene over time.

And firms will start to realise the benefits of deeper, more valuable relationships – including reduced failure demand and unnecessary friction, more cost effective straight through processing, and fewer stress points for employees.

How firms should be addressing this?

In building capability, firms are already facing into practical considerations.

  • Measuring the right things (not just what you currently have data for). Compiling internal and third-party data into a comprehensive picture is critical. Not all metrics are equal – some carry more weight (e.g. a detailed customer outcome review tells you more than a general satisfaction measure).
  • Presenting a fair picture. Have you a comprehensive view of customer outcomes? Is it sufficiently granular to highlight impact on specific customer cohorts, vulnerable customers, and other potential outliers?  Does it spark discussion and suggest where leaders should consider action? 
  • Evidencing action taken. Where outcomes are out of tolerance, is robust action agreed and monitored, along with any improvements made?
  • Escalating appropriately.  A degree of ‘editorial control’ must enable senior management to understand and challenge key issues, without being overwhelmed by too much insight.  Is reporting proportionate in drawing attention to those outcomes that need highlighting?
  • Being inquisitive.  Where current data is not available, or interesting points arise, do you flag areas for further exploration? The FCA have signposted a ‘learn and grow’ approach and it is inevitable that some trends will merit further analysis and consideration over time.

Taken together, consideration of fair value and good customer outcomes are key building blocks in meeting the challenge posed by Consumer Duty.

Want to learn more?  We can help.

Johnston Carmichael has supported a diverse range of financial services organisations with their implementation of Consumer Duty. Our work has included project implementation, complex change delivery, strategy development, change governance, assurance, learning, and Board/Exco engagement. We also enjoy our close, ongoing links with a range of industry experts, trade associations, and regulatory bodies.

Please get in touch with me , our team, or partner – Ewen Fleming – if you would like to explore how support could be tailored to your requirements and budget.


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