In part two of our recent webinar, TCC’s Chief Product and Commercial Officer, Garry Evans invites Director of Advisory Practice, Gary Maude, to delve deeper into the practical areas where firms must focus their efforts to support customers with vulnerable characteristics.

Gary offers a comprehensive perspective on how organisations can align strategy, culture and operational controls to deliver good outcomes and remain compliant with evolving regulatory demands.

From embedding risk appetite into decision-making to ensuring empowerment does not compromise consistency, this discussion explores the tangible improvements firms must make to meet the FCA’s vision of a consumer-centric financial services industry.

Watch the second part here or read the transcript below:

Garry Evans:

You’ve covered off quite a few of the other high-level points there that the FCA are kind of keen on. Do you think you can dig into it a little bit, around the specific areas of improvement that are needed?

Garry Maude:

Yes, I’ll certainly try and perhaps, somewhat reiterate a little bit as well. Culture: do you have an identity? So that’s one really important thing. Are you maternal? Are you litigious? Do you have a risk appetite statement that everybody needs to be aware of and work to? And the thing about culture is that it should be driven down. You shouldn’t end up in situations where the business is essentially creating its own culture and driving up that culture. So the control should be senior management-owned.

And increasingly, part of that is the point around safe environments. How do you create safe environments, and some of again, sceptics might argue it’s not in the customer’s interest to be transparent because they might get a poor outcome if they own up to something that’s unavoidable. But nonetheless, the regulator wants us to encourage transparency from customers to hopefully allow for more fast-track planning.

And, equally, as I mentioned earlier, transparency of colleagues and employees, particularly within the sales cycle, or colleagues who have conflict of interest, whereby they are somehow encouraged to fast-track outcomes that may not marry with the customer’s, own best outcome possibilities. I mentioned strategy; understanding your own risks, end-to-end journey and understanding the role of product governance in that and the fact that vulnerable customers should be considered and ideally avoided. You shouldn’t end up having to react to it because, it wasn’t considered well enough within the product governance cycle. The design test, launch stages, they haven’t linked it to Consumer Duty, to prod rules, to risk appetite as again, that should be driven down.

The business area should not be driving up strategy. It should be part of a cunning plan, which, I guess is easier said than done. But this is the new focus of the regulator, this holistic view. And then, of course, having the right controls. Are the risks and the journey identifying, are the controls applied to those risks assessed at outset and on an ongoing basis? Do you understand how characteristics will impact customer needs as they interface with services, whether it be face-to-face or online. Whether services indeed allow for a good customer interaction? Be really transparent about counterintuitive services. And what I mean by that, a good example is it’s still quite common for frontline call centres to be targeted on getting rid of customers. Get them off the line. You’ve got a thousand more waiting. You’ve got two minutes to deal with the customer. That is clearly counterintuitive to a good customer outcome.

So these are all the type of risks that should be assessed. Processes: do you have the right level of process granularity to allow colleagues to be reasonably consistent whilst being flexible? And that’s the point – that one size does not fit all, and process should take into account, you can have multiple characteristics of vulnerability, all of which should be captured in the treatment, the plan.

Empowerment has been a historic conundrum, particularly if you are a large firm with scale and allowing empowerment to hundreds potentially of colleagues invariably in our experience leads to inconsistency. And the most common weakness we see is processes too open to interpretation. That leads to behavioural or intuitive decision-making. And before you know it, those cultural, strategic points controls that we’ve mentioned are already being diluted. And of course, making sure that where there is empowerment, there are restrictions on empowerment, it shouldn’t be a free-for-all . Which again, is a common cause for failure and the distinction between fear and nice. But one example I would mention is where a firm encourages customers to make minimum payments on debt and keep significant non-essential outgoings to show how nice they were being. But they didn’t realise what they were actually doing was keeping customers’ credit ratings unnecessarily poor for much longer periods of time than they needed, and that was having a detrimental effect on them.

So that’s one example between fair and nice, making sure colleagues are competent, making sure they have the right standards, the right parameters, the right processes. We mentioned making sure the T&C is not just an ‘easy to pass’ once a year experience, but really challenging your colleagues.

And finally, what I would say in that regard in the plan is see it through. A lot of the forums, we’ve heard in some of the vulnerable customer events in talking about make a plan but monitor the plan. Don’t assume it’s going to be the same plan right through to completion. You need to be able to adapt, and then you need to be able to evidence that you’ve concluded that plan consistently and effectively. Be able to measure it against those cultural and strategic drivers. Back to you, Garry.

Ready to watch the rest of the webinar? You can watch the full 30 minutes below.

Now’s the time to review your risk appetite, empower your colleagues with clear guidance and most importantly, make your vulnerable customer strategy dynamic, measurable, and accountable.

The regulator’s expectations are clear – make sure your actions are too. Get in touch today to learn how our regulatory experts can help.