How to overcome challenges in your ‘Dear CEO’ letter

Many of you will have already seen the FCA's recent 'Dear CEO' letter about implementing customer duty.  After reviewing some firms’ plans, the regulator reports that while some are making good progress, others face significant risks and challenges. Across many firms, there are some common areas of  weakness.

Right now, you are focused on what you need to do to comply with the FCA’s requirements. Unlike earlier regulatory compliance initiatives, implementing a few process and business practice changes will not cut it.

The FCA is looking for firms to embrace a new customer-driven approach that embeds improved outcomes into their purpose and culture. For many firms, that represents a major change.  

For those businesses wanting to look beyond compliance, customer duty provides a real platform for differentiation. The importance of empathy and showing genuine care for customers has never been more important than it is today. 

Firms that see the competitive advantage in driving higher levels of customer loyalty will be the winners, as opposed to those that see the ‘duty’ as a tick box compliance issue.  

How are your plans for consumer duty progressing?  

The FCA’s view is that many firms have a long way to go, given that the 31 July deadline is just  around the corner. Not the best place to be five months out, but not the worst either. Read on to find out how to improve your implementation and ensure you're on time.  

As you know, consumer duty consists of key principles and new regulations which firms will have to follow to deliver improved outcomes in four priority areas: 

• Customers should receive communications they can understand. 
• Products and services should meet their needs.  
• Prices should represent fair value.  
• Customers should get the support they need when they need it. 

Understanding what the FCA requires is the easy part. They have published a lot of detail, setting out very specifically what they expect under each of the four outcome areas above.

The biggest  challenge the FCA identifies relates to firms' ability to plan and implement the duty across the organisation.  

The regulator says: “There is a risk that firms may not be ready in time, or they may struggle to embed the duty effectively throughout their business”. 

The higher standards of the duty and the shift to focusing on consumer outcomes will require a significant change in the culture, leadership, and business practices of many firms.  

There are four levers you can pull to deliver improved customer  outcomes

• Culture and people 
• Leadership and governance 
• Planning and implementation 
• Data strategy and insight  

Let's start with your culture and people. 

Culture and people 

The FCA has said clearly that the buck stops with your board and senior management to ensure customer interests are woven into the culture and purpose of your firm. 

But ... cultural complacency is a big risk.

Many businesses have embarked on significant work to reform their culture. But as part of its multi sector feedback, the FCA said that some plans “were lacking in detail in this area, with limited  information about how the duty will be embedded in firms’ culture and people approach.

“In some cases, plans recognised the importance of a culture focused on delivering good customer outcomes but provided little explanation of tangible action the firm needs to take to ensure this is  the case”.

Ask yourself, do we have the right culture and climate in place to consistently deliver better outcomes for customers and ensure they are treated fairly?

This is no time for complacency or inertia. Ask yourself, do we have the right culture and climate in place to consistently deliver better outcomes for customers and ensure they are treated fairly? Do we have the right people approach?

For many businesses, the higher standards in the duty requires a significant shift in culture to effect the change. The cultural shift starts with you. Cultural change is difficult without leadership from the top to champion a clear path for the improvements, set the tone and role model new behaviours.  

This brings us to leadership and governance. 

Leadership and governance 

As the FCA says, “ensuring customers' interests are embedded in your culture and purpose – across the business – will drive 'strategies, leadership and people policies (including incentives at  all levels) that will lead to good outcomes for customers”.  

We want you to go a step further here. The Duty is creating a baseline for businesses, not a ceiling. With the right leadership, strategies and people policies, there is an opportunity to elevate your experience to stand out from your competitors.  

Let's start with the leadership required to shift your culture.  

You'll have already appointed a Consumer Duty Champion on your board. But this should be a supporting role. As a CEO or Director, you're the one who'll need to champion the cultural shift, set the tone and role model new behaviours. You'll need to think about organisational climate too; the two go hand in hand.  

Your culture and climate affect the behaviour of every employee. The behaviour of every employee impacts the experience of every customer. Poor behaviour = poor customer experience outcomes. 

Set a clear path for rooting the requirements of the duty in everything you do. This will require vision, purpose, energy, and empowerment. Your employees will need to feel empowered and have the skills to change their behaviour to deliver the change.  

The starting point is to think about the behaviours, attitudes and underlying assumptions that have become ingrained in your business.  

There are two crucial questions here: 

• How does our culture, purpose and values align with delivering good consumer outcomes?
• What practical steps can we take to ensure this happens? 

Start by bringing your senior team on board to help drive the change. Align your senior leadership around the mission to help drive an understanding of (and  commitment to) the change. 

Leaders who are not on board will undermine the change effort – intentionally or unwittingly – by the actions they take, the priorities they set and the behaviour they  display. 

People will know if their leader is rooted in the old and a reluctant participant in the new. Change on this scale requires people throughout the business – at all levels from leadership to the front line – to be equipped to deliver good outcomes.

Leaders play a key role in creating organisation-wide buy in and momentum. It will not happen if people don’t understand it, and appreciate the benefits to them and the organisation and genuinely believe in it.  

As discussed earlier, the FCA has also said that it expects good governance and oversight. So be clear about who is currently accountable for the overall plan, the day-to-day delivery and board oversight. 

Planning and implementation 

Culture and leadership are the bedrock of a successful transformation. But most transformations also fail because there wasn't a clear implementation plan. A root and branch transformation will require a gap analysis across the business.

Businesses should be asking themselves these questions: 

• At which touchpoints is there the greatest potential for good/poor consumer outcomes?  
• Where does communication need improving?
• How can you create more value and a seamless experience? 
• How do we ensure that our products and value-added services differentiate us?
• How can your people be more empathetic in customer interactions? 

The importance of empathy and showing genuine care for customers has never been more  important than it is today, and firms that see the competitive advantage in driving higher levels of  customer loyalty will be the winners, as opposed to those that see the Duty as a compliance issue.   

Be clear about how you deliver on the four outcomes of the Duty. Think about how you map workstreams to different parts of the business and engage stakeholders from every corner of the organisation.  

• Can you progress these streams in parallel, not sequentially? 
• Are there tactical/partial fixes that we can implement now to meet the deadline?
• Are there strategic solutions that can wait for a later date? 

Think about the skills and capabilities the organisation needs to make the change and achieve your transformation goals. There are two dimensions here. The first is about the (new) skills the business will need. The second relates to resourcing – the number of people needed to successfully support the transformation.  

Are there gaps in knowledge or skills that need closing? 

Focus on building the support infrastructure to embed and sustain the new way. This will help to prevent your firm slipping back to the old way of doing things. 

Data strategy and insight  

Measurement is the key indicator of the progress being made to implement against the requirements of the duty. But as Simon Fraser, VP of Customer Experience Strategy at InMoment, says: "Measurement is only a ‘means’ however important. Your data is the enabler, a guide to where to best focus, and a predictor of impact."  

'Measurement is only a ‘means’, however important. Your data is the enabler, a guide to where to best focus, and a predictor of impact.'

What would the experiences you offer look like with no one watching? How should all your teams think and act? How well enabled and supported do they feel? How well does your purpose and culture support the FCAs goals? Getting the culture right around delivering the behaviours and outcomes as set out by the FCA should be your ‘end’ and purpose. 

Assessing, testing, understanding, and evidencing customer outcomes will be impossible without a granular data plan. Think about the data and priority metrics you already collect to measure and monitor the delivery of these outcomes.  

• How will you close any data and measurement gaps? 
• How far should you switch the focus of your CX surveys toward measuring consumer duty requirements? 
• How can you integrate the different data signals to create a 360-degree view of risks, performance, and progress? 

There is a lot of work here. If you are falling behind in your preparations, don't be concerned.

How we can help 

We have worked with financial services partners to retool and change behaviours to deliver better outcomes for customers. This doesn't need to take years (which you haven't got) or be disruptive. 

Our approach helps senior teams quickly identify the changes you need to make sure the entire business is wrapped around your customers. The approach is designed to deliver advice and give you ideas and direction as quickly as possible.

 We'll help you make tangible progress and establish clarity and focus.  

If you are unsure about the way forward to meet the deadline or would like a fresh perspective on your implementation programme, you can learn more by downloading our guide: An Inconvenient Truth: Creating Customer Loyalty  Starts with You.