How brokers can prepare for the new consumer duty regulations
The FCA’s new consumer duty requirements are set to be published at the end of July for implementation in April 2023.
While the overwhelming majority of brokers provide a useful and ethical service, the regulator is concerned that not all financial services work well for consumers.
The new rules are set to address the root causes of inefficient practices and raise industry standards by putting the onus on firms to get products and services right in the first instance.
As the mortgage industry prepares itself for a new era, Mel Spencer outlines five top tips for brokers to ensure they meet the updated requirements:
1. Evaluate the rules against your business
Brokers should prioritise reviewing the FCA’s expectations against each element of their business ensure they are in the best place possible to make changes once the changes are confirmed at the end of the month.
The duty is predominantly focused on ensuring good consumer outcomes . With this in mind, there are four outcomes that firms are required to achieve:
- Products and services: All products and services must be fit for purpose, and be designed to meet consumers’ needs.
- Price and value: All consumers must receive fair value.
- Consumer understanding: Communications must support and enable consumers to make informed decisions.
- Consumer support: Firms must provide a level of support that meets consumers’ needs throughout their relationship with the firm.
2. Lean on technology
The new Consumer Duty requires brokers to ensure their clients understand the products offered to them, and that brokers provide quality support throughout a client’s entire relationship with the firm.
Brokers can benefit from sophisticated technology to offer this level of service without stretching capacity. These sophisticated platforms can, for example, automate emails to help brokers keep in regular contact throughout a client’s entire mortgage journey and ensure they are sourcing the necessary information to help clients access the right product.
Furthermore, through additional API-integrated services and tools, brokers can also provide quotes for protection, conveyancing or general insurance quotes through the same platform.
3. Advising on protection is vital to providing complete support for clients
To meet the FCA’s requirement that customer needs are met and that they receive proper support, brokers must ensure they have frank and open conversations with clients on their need for protection. For instance, some clients may not have life insurance, or they may have a plan which does not meet all their needs.
To meet the FCA’s updated requirements and as a measure to help close the protection gap in the UK, brokers must take stock to evaluate whether their customers are receiving adequate coverage and whether they may need to consider upgrading to a more extensive plan.
By keeping in regular contact with customers over time, brokers can improve their understanding of each client’s needs and ensure that clients are covered even if situations change.
4. Finding the right mortgage club is essential
For brokers to meet the FCA’s requirement of providing fit-for-service products which are designed to meet consumers’ needs, working with the right club is essential. A good mortgage club will provide advisers with access to products, often exclusively, to ensure the broker has all the necessary tools to support their clients in finding the best deals.
It is vital for brokers to regularly assess whether their current club is supporting them to, in turn, better support their clients. For instance, brokers should take time to consider if the club offers a suitable protection panel as well as a mortgage panel, or if it provides market-leading technology to help them streamline processes and spend more time ensuring clients are properly serviced.
5. Using tools to ensure all clients receive fair and equal treatment
For many clients, purchasing an insurance or mortgage product is the most expensive financial decision they will ever make. During a time of increased financial vulnerability resulting from COVID-19 and a spiking cost of living, the consumer duty changes are acutely concerned with ensuring a high standard of customer service.
To ensure that brokers provide fair treatment for all customers, they should take measures to understand the needs of all customers including developing accessible communication plans to suit clients no matter their level of vulnerability. Having simple measures, such as a technology platform which allows brokers to log clients preferred contact method and automate contact points accordingly, ensures that all clients receive a tailored service to experience the same outcome.
Written by: Melanie Spencer and Brandon Russell from IFA Magazine