The Financial Conduct Authority’s (FCA) new Consumer Duty requires financial services firms to deliver a higher standard of care and consumer protection across all aspects of their relationship with retail customers. The FCA has been clear that achieving the intended aims of the Duty will require a significant cultural shift for many firms. Whether firms successfully realise these expectations will be heavily dependent on their cultural orientation, and the extent to which firms embrace and embed a genuine customer-first approach across all aspects of their business.
Acknowledging the significance of the new Consumer Duty, we are focused on assisting its member firms, and the industry more broadly, to achieve an alignment between their organisational cultures and the objectives of the new Duty.
As a starting point for this work, the 2022 FSCB Employee Survey included four additional questions related to concepts outlined in the FCA’s Consumer Duty. We included questions which we hoped that, alongside our six existing customer focus core questions, would provide useful initial insights, from the perspective of member firm employees, on key areas relevant for the new Duty. The diagram below maps these additional questions, and our customer focus questions, to the four Consumer Duty outcomes. The remainder of this article provides an overview of key industry-level findings from these questions.
Figure 1 FSCB Employee Survey questions mapped to Consumer Duty outcomes
Customer focus questions
Aggregate industry scores on all but one of the six customer focus questions have seen declines over the last two years, after peaking in the 2020 Employee Survey. The exception to this trend is the question relating to employees being encouraged to provide customers with information in a way that helps them make the right decisions, with the level of agreement among Survey participants increasing slightly but steadily overall from 87% in 2016 to 89% in 2022. On the other hand, 75% of employees agreed with the statement ‘when my organisations says it will do something for customers, it gets done’, falling from a peak of 80% in 2020, and only somewhat higher than the 72% agreement level reported in 2016.
Further analysis also highlighted variation in the extent to which employees in different business areas expressed agreement with the customer focus questions. In general, Retail Branch employees tended to answer these questions more positively compared with other business areas. Figures 2 and 3 below provide illustrative examples of this variance across business lines in response to two of the customer focus questions.
Figure 2: ‘I believe that my organisation responds effectively to customer feedback’ – % agreement by business unit
Figure 3: ‘When my organisations says it will do something for customers, it gets done’ – % agreement by business unit
Additional Consumer Duty related questions
Our 2022 Employee Survey results, published recently, showed significant variance in responses across business lines to the four additional Consumer Duty-related questions as well (as shown in Figure 4 below).
Figure 4: Industry level results on Consumer Duty questions
When looking at the results at a more granular level, the range of responses to these questions by business units across firms was a striking feature of the data, varying considerably more than is normally observed across the FSCB Employee Survey core question set. For example, as shown in Figure 5 below, 48% of all Operations employees across the industry agreed that it is as easy for customers to cancel a product or service as it is to obtain it. However, this proportion ranged considerably between Operations areas in individual firms, with 33% being the lowest percentage and 86% the highest across participating organisations. This variance in results highlights the importance of firms drilling down to understand where and why differences may exist across their business units, and tailoring implementation of the Consumer Duty to respond to the different ‘current states’ of these teams.
As Figure 5 also demonstrates, Retail Branch employees were an exception to this general trend. There was a narrower range of responses to the additional questions for this business line across firms and, echoing results on the customer focus cluster of questions, Retail Branch employees tended to answer the Consumer Duty additional questions more positively than employees in other business areas.
Figure 5: Range of % agreement to Consumer Duty related questions, by business unit, by firm
Differences among employees with different levels of seniority or accountability
When reviewing the results across different demographic categories, a regression analysis identified that employees who are line managers tended to answer the additional Consumer Duty questions more positively than employees who are not line managers (controlling for other factors). Similarly, employees who are subject to the Senior Managers and Certification Regime (SMCR) also tended to answer most of these questions more positively than those who are not subject to either of the two regimes. The tables in Figure 6 and 7 below highlight the differences in agreement across these groups.
Figure 6: Differences in agreement between line managers and non-line managers
Figure 7: Differences in agreement between those subject to the SMCR and those not
It is important to note that the trend identified above aligns with what we generally see across our core Survey questions over time. However, when considering the requirements of the Consumer Duty, these differences in how employees of different seniority or accountability levels responded perhaps raise some questions for firms to explore further why this might be the case. It will be important for senior decision makers at firms to feel confident that they are receiving all relevant information as it travels up the line and are able to get ‘under the hood’ when needed. These results also highlight the importance of having an effective Consumer Duty champion on the board (as the FCA expects) to ensure meaningful challenge and to test that their organisation is robustly designing, measuring and analysing customer outcomes over time.
Words used to describe firms
Each year, the FSCB Employee Survey asks employees what three words they would use to describe their firms. For the first time in three years, ‘customer’ slipped from first to third in the ranking at the industry level, appearing proportionately less often in employee responses compared with recent years. However, it remains near the top of the list – squeezed out only by other positive terms ‘supportive’ and ‘inclusive’.
Figure 8: Changes to the words employees use to describe their firm, 2020 – 2022
Perhaps unsurprisingly, those who responded positively to the additional Consumer Duty questions were more likely to include ‘customer’ and ‘inclusive’ when describing their firms, compared with those who disagreed with these questions. Employees who answered these questions negatively were instead more likely to use ‘slow’, ‘bureaucratic’ and ‘outdated’.
The Consumer Duty represents an opportunity for financial services firms to ensure all aspects of their business are oriented toward delivering good outcomes for retail customers, and that their employees are equipped to understand their role in delivering these outcomes.
How a firm aligns its organisational culture and purpose with these objectives will be key to achieving successful implementation of the Consumer Duty across the sector. The FSCB will be working with member firms over the coming months to understand where we can most usefully provide insight and develop best practice guidance to support Consumer Duty implementation.