Bring on the benefits of Consumer Duty

With the FCA’s Consumer Duty regulations coming into effect on 31st July, we’ve spent quite a lot of time recently exploring how our clients could make their comms and collateral clearer and more digestible.

Much of our work has involved both vulnerable and non-vulnerable customers and, frankly, it’s been illuminating. We’ve found that having an appetite to engage with information is just as fundamental as the ability to understand. The two are sometimes linked but not always.

Take Andy* who had recently bought a new build home. He used to be a CEO and has recently bought a £1m home in the country – the retirement pad. Clearly a smart, commercially savvy customer who claimed he understood all the literature supplied by the builders and insurers for his new build. But an ability to comprehend is not enough you also need engagement “I read everything… oh I’ve never seen this document… (once pointed out in pack that he had already)… oh it was at such a busy time I got thousands of emails and documents”

Then meet Kieran* who was diagnosed with dyslexia in secondary school and has always struggled with literacy and numeracy. He has adapted to his situation and ‘figured out a life where I don’t have to read too much – I can watch it instead on YouTube and I rely on autocorrect’. For Kieran, large blocks of text filled with jargon are totally impenetrable and it leads him to avoid reading. Kieran told us that simple, short summaries of the key points of any given document would help his understanding and make him feel less in the dark about potentially important messages.

Maybe Andy would have found the time to look at the documents if they’d been designed with Kieran in mind…

How regularly someone deals with formal financial or legal documents in wider life is also a big determinant of appetite and ability to take away the right information.

Meet George*, a first time home buyer we met who works in maritime risk and compliance and deals with legal and financial literature regularly. Despite having no experience of purchasing a home and the processes involved, his job and natural eye for detail meant he was very engaged in the financial and legal documents during the journey. He was comfortable spending evenings going through the documents at the time of purchase (i.e. it didn’t feel like a big task) and was able to recall sections of his insurance policy easily and had a very good understanding of his cover.

And, of course, it’s not just about having the will, it’s surprising how many of us don’t understand relatively basic financial concepts like interest. Sarah* was a case in point…

She works in a corporate job but admits that numbers just aren’t her thing. When faced with the term ‘deferred interest’ she just can’t engage as she doesn’t know what the term means “Does deferred interest mean interest before you took the plan or something else? I just don’t know what that means so I would ignore it”. Are you reading this thinking you’d do the same thing?

Last week I was decoding some credit stimulus with colleagues in a bid to work out how we could explore it in a meaningful (and ideally engaging) way. It transpired that two out of the three of us had misunderstood how the interest was applied on repayments… Between us, we have three degrees, a century’s worth of life experience and beyond some mild dyslexia, nothing that would register on the FCA’s vulnerability index.

All this reminds me of Hans Rosling’s beautiful phrase ‘the mega misconception that ‘the world is divided in two’**. It’s so easy to think of vulnerable vs non-vulnerable customers but actually we’re all on a spectrum. Make materials better for vulnerable customers, you make them better for all of us.

Personally I’m looking forward to feeling the benefit of Consumer Duty on a website near me soon.

*names changed for confidentiality

**From Hans Rosling’s Factfulness – Ten Reasons Why We’re Wrong About the World and Why It’s Better Than You Think