"The Consumer Duty document is absolutely essential reading; it is the biggest shake up financial services’ lead generation has ever seen."
In response, in May 2021, the FCA proposed a new set of regulatory rules and principles to provide consumers with a higher level of regulatory protection when they are researching, seeking advice and buying financial products. This new ‘Consumer Duty’ aimed to ‘set higher expectations for the standard of care that firms provide to consumers’ in what would require a ‘significant shift in culture and behaviour’ for many.
Following two consultations, the FCA is set to publish the final document by July 31, and regulated firms will have until April 2023 to implement the new rules.
Ultimately, the FCA wants firms to ask themselves ‘would I be happy to be treated in the way my firm treats its customers?’ and if the answer is no, then something needs to change.
One of the key focuses of a new Consumer Duty is the customer sales journey, specifically, the fact that regulatory oversight needs to cover the entire customer journey, not just the part where the regulated firm is in direct contact with the consumer.
Most regulated firms will be thinking ‘we do everything by the book, we don’t need to worry’ but the key question here is – do you really know everything about your customers’ journey before they reached you?
Under the FCA’s proposals, there will be a renewed focus on misleading advertising that pulls a customer into a journey they did not want or expect, meaning financial firms will need to be absolutely sure that the customer has been delivered to them knowingly and willingly.
In terms of lead generation, this means firms will need to be able to evidence three key things; firstly, that they have full oversight of the whole customer journey, “from marketing, to sale, and post-sale service”.
Secondly, that they have removed ‘sludge design’ – i.e. any tactics that make it harder for the consumer to do what’s in their best interest, this includes things like ‘online’ quotes, and calculators that don’t deliver an online quote, but instead capture the consumers’ details which are then passed on so that they become subject to endless unsolicited sales calls. And thirdly, be able to prove they are delivering ‘good outcomes’ for their customers.
Regulated lead gen firms will have to prove that the way the consumer has been sold to – i.e. the adverts and landing pages they have seen – has considered their needs.
And buyers will need to be able to demonstrate that they not only have oversight of the entire customer journey, but that they are willing to challenge any part of that journey that falls short of what the customer deserves. The FCA has said the new Consumer Duty would apply to ‘unregulated activities which are ancillary to regulated activity’ so lead buyers will also become directly liable for unregulated lead gen, meaning ignorance is no longer an excuse.
So, if your firm buys or sells leads for regulated financial products, the Consumer Duty document is absolutely essential reading; it is the biggest shake up financial services’ lead generation has ever seen. It may be long overdue - we have argued for some time that the FCA has failed to consider some of the most basic and prolific examples of misleading advertising by not having a good enough understanding of the customer journey – but its intentions are unarguably good, and should certainly sort the wheat from the chaff, as those who are falling short of their consumer duty, will be forced to clean up or clear out.