Written by: Gareth Herbert, Distribution Director at Mortgage Advice Bureau
Let’s first go back to basics and pinpoint exactly what Consumer Duty is all about. At its core, Consumer Duty is about consumer protection, with the overarching principle to ensure that all firms are acting to deliver good customer outcomes. It places the onus on financial firms to prioritise consumer welfare, emphasising the importance of clear communication, personalised assessments, and ethical conduct.
There are three cross cutting rules that organisations must take into account:
Act in good faith
Avoid causing foreseeable harm
Help customers proceed with their financial objectives
Moreover, there are four additional key areas that we will need to take into account:
Product and service - ensuring you’re identifying, talking to, and distributing mortgage products to the right target markets
Price and value - evidencing that you’re providing fair value to customers through the products they distribute
Consumer understanding - making sure that the communications customers receive are easy to comprehend
Consumer support - creating good outcomes throughout the entire customer journey
Analysing broker’s attitudes
While many brokers have taken proactive steps to align their practices with the new requirements, others are still navigating this. According to a survey issued by the FCA in Q2 2023, 69% of brokers believe they will be ready to comply with Consumer Duty requirements once they come into force.
It also revealed that awareness was high, with 92% of all businesses and 96% of brokers aware of Consumer Duty. Confidence is fairly good, with 67% of firms expecting full compliance by the deadline, and 23% describing themselves as ready for most requirements.1
While the above statistics certainly indicate that there is a general feeling of confidence among brokers that they can and are meeting Consumer Duty requirements, there is still a clear indication that more needs to be done to help them feel prepared.
How can Consumer Duty benefit brokers?
In a market where consumers are becoming increasingly discerning, brokers that demonstrate a commitment to customer protection and transparency are likely to attract and retain more clients. Furthermore, by providing tailored solutions and transparent communications, brokers can build stronger, long-term relationships with customers, which may result in increased referrals and positive word-of-mouth.
How can brokers ensure they’re meeting Consumer Duty requirements?
Protecting vulnerable customers
Protecting vulnerable customers remains a key focus for the FCA, and as brokers, it’s our job to ensure that the livelihoods of our customers are as safeguarded as possible, and that they’re treated fairly at all times. Providing customers with access to forms where they can outline their experiences and concerns and disclose any vulnerabilities they may have or issues they are facing, is good practice.
This is also an opportunity for brokers to obtain customer feedback, and use it to implement and inform the way they address vulnerability. By working together to support customers - whether by having difficult conversations with them or signposting them to the appropriate support resources - you can ensure they feel reassured, informed, and empowered to make the right financial decisions for their circumstances.
Tailored solutions for customers
Brokers must act honestly, fairly, and professionally in all elements of their role, placing the needs of their clients above their own. You’re most likely already complying with this element of Consumer Duty without even realising, simply by providing customers with suitable advice and tailored solutions to meet their individual needs.
As mortgage brokers, if someone asks you what do you do for a living, it’s not simply that you arrange mortgages - you help people buy homes, achieve their dreams, and protect their family.
Under Consumer Duty, all communications must be transparent, understandable, and devoid of any misleading information that might lead consumers to make uninformed decisions. The FCA often talks about channels of support, so if you've got a website containing educational content, you should use it as a signpost. Signposting is really important, as it’s about having somewhere for customers to go - it could be a website, app, or telephone number. Ultimately. it’s about making sure they can find what they want, when they want it - even if that is a complaint form.
Fortunately, complaints can often turn into your best advocates. Use these as an opportunity to grow, and always ensure you have total clarity about what customers need to do. Help people understand where they can go, and what they can do when they need help. It all comes back to being clear. Analyse complaints to understand the root cause, as this will allow you to serve your customers better and make sure you don't make those mistakes again.
By taking proactive steps to meet Consumer Duty requirements, you’ll be actively demonstrating a genuine commitment to serving the best interests of your customers. You should also see these new rules as an opportunity to strengthen your firm’s reputation and drive positive change within the industry. After all, the end goal is to ensure you’re delivering good outcomes for your customers, and if they have a great experience, you’ll continue to reap the rewards of your success.
1 FCA, 2023