Clear communication and understanding is central to delivering good outcomes.  But for many customers, comprehension is a substantial barrier to overcome.  It can be challenging to fully understand the intricacies and implications of the financial products they use and may need.

By way of example, mortgage products, investment accounts, or pensions are all long-term commitments.  For a customer to make the most of these, they need to understand how the products are intended to perform, as well as costs and benefits, over a period of more than 25 years.  For a firm, the product’s complexity and lifespan requires lengthy terms & conditions, disclosures, agreements, caveats, warnings, and a lot of technical explanation.

It’s a complex conversation to have.

Faced with this challenge and a societal shortfall in customer understanding, Consumer Duty clearly directs the industry to respond more effectively.  But are individual firms ready, willing, and able to re-think how they communicate their products and services?

What does Customer Understanding mean?

To be certain of good outcomes, customers must be able to understand products and services, and consider how they meet their needs.  Consumer Duty signposts two key areas where understanding needs to improve.

Firstly, communications must be clearer and easier to understand, supporting their recipients’ needs rather than a one-size-fits-all approach.  They should be designed to prompt action where needed.

Secondly, firms should regularly seek feedback on communications.  Were messages understood, what action (if any) was taken in response, was this action expected, and has a good customer outcome been delivered?

Why is this important?

1 in 7 UK adults have the literacy skills of a 9-year-old and half of all adults lack the skills or confidence to deal with numbers.  The FCA’s own research suggests 27% of customers found the information provided “didn’t help at all” when making a decision, 24% have “low confidence” in managing money, and 38% describe their knowledge of financial matters as “low”.

Understanding financial services is highly challenging for many.  And needs are most acute for vulnerable customers, especially those struggling with capability, income, debt, or low savings.

Today, most firms have well-established controls around customer communications, for quality (copywriting) or technical content (often driven by financial promotions rules).  The shift from paper to digital has increased personalisation and enabled new methods of delivery.  Yet, many communications still look like posts on a noticeboard.

Consumer Duty sets out the regulator’s expectation of a required uplift in firms’ capability.  By recognising the range of customer capability, created content should dynamically lead readers towards a good outcome – regularly tested and refined to continue meeting their needs.

Supporting Consumer Understanding in practice

So, how does the industry positively address this challenge?  Some considerations:

• Uplifting firms’ capability – Firms should assess and improve their capabilities for communication design and comprehension testing, recognising these as advanced skills.  Shaping a communication style and ‘voice’ should proactively address target customers’ needs.
• Simplify – Continually refining communications to simplify key messages and ensure that complex topics are accessible to target customers.
• Tailoring to customer cohorts – Developing communication styles and approaches for specific cohorts ensures messages are relevant to specific needs and better understood, especially where ‘mass market’ products might attract a wide range of customer types.
• Measuring understanding and action – Testing understanding (distinct from satisfaction) and action.  Critically assessing customer behaviour should help you identify and address any potential for harm.
• Recognising Behavioural Bias – Predicting and working to prevent bias, to improve customers’ decision-making and ensure good outcomes.

Consumer Duty seeks to equip all customers with the confidence to navigate a complex financial landscape.  The true measure of success is not just what is communicated, but how well it is understood, is acted upon, and empowers the recipient.

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.