The Consumer Duty deadline is fast approaching. By 31 July, firms in our sector must be compliant with the new regulation.
That’s a challenge for many brokers who face a busier working week as a fall in rates — following the highs of the mini-Budget — and better market conditions have led more buyers to try to strike a deal.
However, brokers must make sure they plan, prepare for and comply with the regulation, part of which involves identifying how their business puts customers first.
Tech can identify financially vulnerable customers
Some firms may have ingrained practices that are no longer fit for purpose, such as ‘out of date’ approaches to assessing customer financial vulnerability, while others may embody the spirit of the Consumer Duty but are unable to provide real proof.
Although the regulator’s ‘vulnerable customer’ guidance states that vulnerability can express itself in a number of ways — including in relation to health, finances, capability or a life event — technology is especially suited to addressing the financial aspect. As the deadline looms, tech could be the key to helping firms overcome this challenge.
Protecting the vulnerable
The exact requirements of the Consumer Duty have been a long time in the making, but the FCA’s stance on financially vulnerable customers has been clear for years. Rising living costs and financial uncertainty, though, have brought new urgency to the issue. In May last year, the regulator estimated the number of UK adults with low financial resilience had risen to 12.9 million — in other words, one in four UK adults.
This will require some housekeeping. Brokers must keep on top of the data, analysing it regularly. And they must communicate often with clients
It’s no surprise, then, that the FCA has integrated its guidance on handling financially vulnerable customers into the Consumer Duty rules. This means, regardless of how hard or complex it is to identify and support financially vulnerable customers, the needs of individual clients must be adequately assessed and further support provided as necessary.
If that seems overwhelming, tech can play a significant role in helping brokers fulfil this requirement.
Better outcomes
Tech doesn’t just speed up the mortgage journey. It can also ensure better outcomes for customers.
Looking specifically at financial vulnerability, tech can help brokers to deduce whether a customer’s vulnerability is a permanent or temporary issue, enabling them to tailor their approach and advice accordingly. By using existing data and customer research, brokers can create personas to understand the nuances of financially vulnerable customers and produce a course of action should a customer fall into financial hardship.
Adopting the technology now will give brokers a launchpad to take advantage of digital tools in the future and boost customer retention
Open Banking can also be of use as it gives customers access to their financial data, enabling financial vulnerability to be identified via spending patterns and other transactions. By leveraging this data, brokers can pinpoint vulnerable customers and protect them from financial harm before matters potentially get worse.
Customer relationship management systems can also be useful, giving brokers access to open data. Some systems even have integrated credit reporting, enabling clients to complete their factfind using information from their credit file, and to track their cases in real time. Not only does this make it easier for customers to share information; it gives brokers accurate data from the outset, so they can get a robust view of an individual’s financial standing and ultimately recommend the right product.
Tech can help brokers to deduce whether a customer’s vulnerability is a permanent or temporary issue
Depending on resources, brokers can even take it one step further with customer research — sending out surveys and producing digital ethnographies to come up with an accurate picture of a client’s financial profile.
Housekeeping
These tools can be used for all customers, but they are key to identifying financially vulnerable clients and keeping abreast of their financial situation, which will help firms to be on the right side of the Consumer Duty.
However, this will require some housekeeping. Brokers must keep on top of the data, analysing it regularly. And they must communicate often with clients to stay in tune with their financial circumstances.
Tech doesn’t just speed up the mortgage journey. It can also ensure better outcomes for customers
Brokers have taken great strides to become compliant with the new rules with time to spare, but continually reviewing their practices will be key to maintaining high-quality consumer outcomes. Tech can play a central role in helping them demonstrate they are keeping up to date with financially vulnerable customers.
In addition, adopting the technology now will give brokers a launchpad to take advantage of digital tools in the future and boost customer retention by streamlining their operations.
Jodie White is head of product and transformation at Legal & General Technology
This article featured in the May 2023 edition of MS.
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