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A Matter of Trust

A Matter of Trust

The forthcoming Consumer Duty has received a lot of media coverage. Whilst much of this has been high-level, there is a key area in FG 22/5 that is yet to receive a spotlight in the wider press. However, it epitomises one of the key concepts behind the Consumer Duty – trust.

What the FCA Says About Trust

“We will also monitor what products and services consumers use, and measure what consumers are seeing and feeling and their levels of trust and confidence” – FCA Consumer Duty, PS 22/9.

Under the Consumer Duty firms must “act in good faith towards retail customers”. ‘Good faith’ is generally accepted to mean that somebody acts honestly in their dealings with another. If somebody acts with good faith in their dealings with you, over time, that builds trust.  

Point 5.40 of the FG 22/5 states:

“Where a firm declines to provide a customer with a particular product or service, the firm should still consider whether there is information or support it could provide to help the customer pursue their financial objectives. For example, a firm could signpost a customer to a third party that provides reliable and relevant information to such consumers.”

An explicit requirement to signpost customers to another provider is already in place for travel insurance, as point 5.41 clarifies:

“Travel insurance firms are required to signpost customers with pre-existing medical conditions to a directory of specialist insurers in certain circumstances. This approach is consistent with our expectations under the Duty, as firms signpost declined customers to a reliable source of information to help them achieve their financial objectives. Firms in other markets should consider a similar approach when they decline customers.”

In the final sentence, the word “decline” could reach further than initial interpretations may suggest. In the context of the Consumer Duty, I believe it could include instances where a broker might “decline” to provide a service that a customer might reasonably expect. 

For example, consider a customer who visits a broker for a mortgage. It might be reasonable for the customer to expect the mortgage broker to provide them with a quote for their home insurance. If that broker doesn’t offer said insurance, my interpretation of this Consumer Duty point means they should consider signposting that customer to a trusted source of information to help them obtain home insurance.

Considering something doesn’t mean you must do it. As part of your Consumer Duty planning however, it’s wise to consider where you would direct customers for services you don’t provide and record the outcome.

Commercial considerations are clearly important, as businesses need to be profitable. But, they shouldn’t be the sole factor in a decision where there is a risk of poor consumer outcomes. Many brokers don’t offer a GI service simply because it “isn’t worth it”, but leaving customers to their own devices may not be the best way to ensure good consumer outcomes. 

Over the years, the market has seen a decreasing number of professionals offering GI services, and the FCAs consumer duty requirements are creating further doubt amongst those currently offering GI. I feel this may be offering a disservice to customers, potentially working against the ‘spirit’ of the Consumer Duty, particularly if the decision not to offer GI is driven only by commercial considerations without considering the customer impact.

Now more than ever, there is an increasing need to offer a holistic service to customers – particularly those customers with characteristics of vulnerability.

If you don’t offer a GI service yourself, passing the customer off to a reliable source of information or advice is more likely to result in trust, which is reflected on you. It’s also likely to align with the sentiment behind point 5.40 of FG 22/5, and that of the whole Consumer Duty. Giving this some serious consideration should be a part of any brokers’ Consumer Duty planning – and documenting these considerations shows how seriously you’re taking new requirements.

To find out more about Consumer Duty from the FCA’s standpoint, follow this link. Take a look at the rest of our blog for more news about Consumer Duty.