Financial firms are not doing enough to monitor outcomes for vulnerable customers, the FCA has warned in its Vulnerability Review, published today.
The FCA said: “What we have seen indicates that firms either find it challenging to monitor outcomes for customers in vulnerable circumstances, have underestimated the depth of monitoring required, or choose only to monitor readily available data.”
It said firms could not always show a clear understanding of the needs and characteristics of customers within their target market and a clear vision for what good looks like for customers with different or additional needs.
The FCA review analysed responses from 725 firms from across the financial sector.
Consumer Duty
Under the Consumer Duty, firms must monitor and regularly review the outcomes their customers are experiencing.
They must also identify where customers or groups of customers are not getting good outcomes and understand why.
And they should have processes in place to adapt and change products and services, or policies and practices, to address any risks or issues identified and stop them occurring in the future.
Where a firm chooses to outsource elements of its consumer support to a third party, it should have systems and controls in place to monitor and provide assurance it is meeting regulatory obligations.
Use of data
The FCA said that it found firms often relied on data that lacked breadth and granularity. This limited their ability to compare and reach conclusions about outcomes of different groups of consumers.
The FCA said that in its firm survey, respondents said they frequently used management information (MI) on:
- Complaints data (79% of firms)
- Staff feedback (78% of firms)
- Quality assurance findings (64% of firms)
But far fewer respondent firms said they were using:
- Customer feedback directly from customers in vulnerable circumstances (49% of firms)
- Behavioural insights data (36% of firms)
- Referral and take up rates of additional support (29% of firms)
Areas for improvement
The FCA said that while the Consumer Duty has focused firms on this area, most firms were unable to effectively monitor outcomes for customers in vulnerable circumstances.
It said key areas for improvement include:
- Lack of clarity on what firms consider to be good and poor outcomes
- Poor quality or insufficient data preventing firms from effectively measuring customer outcomes, and how these differed for customers in vulnerable circumstances
- Unclear and inconsistent approaches regarding when to act and what actions to take in response to poor outcomes for particular groups
- Lack of engagement, challenge and direction from senior leaders
Good practice
But when it came to good practice, the FCA said that firms doing best at monitoring outcomes tend to:
- Clearly define a good outcome
- Use good quality data to understand the outcomes of customers in vulnerable circumstances
- Have clear escalation processes to identify poor outcomes
- Have strategies to make improvements
- Be able to show what they did where they identified poor outcomes and evaluate whether those actions are effective
- Have senior leadership that is engaged on outcomes for customers in vulnerable circumstances
Defined good outcomes
The FCA said that firms that could effectively monitor outcomes for customers in vulnerable circumstances tended to set out what a good outcome for a particular product or service looked like. This helped support and structure how firms monitor whether customers receive good outcomes.
Use good quality data
The FCA said firms who collected relevant data to make evidence-based assessments of their customers’ experiences were better able to understand whether they were delivering good outcomes. They could then use this to inform their approach to improving outcomes.
Escalate issues and act to improve outcomes
Some firms proactively reviewed customer experience and outcomes. Where outcomes monitoring tended to be better, firms acted where they saw poor outcomes, responding flexibly to customers’ circumstances.
Such firms escalated issues to senior leadership, adapted processes as needed, and evaluated the impact of their interventions.
Senior leadership engagement
The FCA said some firms’ senior leaders set clear, consistent strategies across business lines, giving appropriate priority to the delivery of good outcomes for customers in vulnerable circumstances. Those leaders also engaged with key management information (MI) and decision-making.
The FCA firm survey showed 79% of respondent firms said their senior leadership had active involvement such as reviewing governance arrangements, processes and systems. And 70% said their senior leadership was responsible for delivering good outcomes for customers in vulnerable circumstances.
The FCA said: “We saw that genuine engagement by senior leaders – rather than only in principle – improved the quality and cohesion of a firm’s approach to vulnerability, and the prominence of vulnerability in firm culture.”
