Ensuring quality in customer-facing processes: Tracking Consumer Duty outcomes

Most firms will by now have finalised and put in place procedures for the first Consumer Duty Annual Report – which was due in July 2024. But in working with a broad range of clients across all sectors of financial services, Worksmart recognise a common theme and a concern. Where firms have taken more of a box ticking approach in their haste to get these deliverables over the line, rather than having taken a step back to consider the actual benefit and value of their Annual Reports in the context of the spirit of the regime and the regulatory requirements demanded by Consumer Duty.

The guidance from the FCA states that the Annual Report should include:

• The outputs of monitoring that allow firms to assess whether products and services are delivering expected outcomes in line with the Duty.
• Evidence of poor outcomes, including whether any trends and themes across the customer base.
• Root cause.
• An overview of the actions taken to address risks and issues.
• Evidencing how the firm’s ongoing business strategy is acting, responding and evolving towards delivering good outcomes.

In the main, most Boards will likely have seen these Consumer Duty MI packs at least three times in the past year or so already, so senior managers should already be aware of the likely content and the Consumer Duty Champion should have been keeping them informed of actions, plans, and progress.

These box ticking elements of the Annual Report are obviously key, but it’s also important to challenge the business, to go beyond these basic elements and provide senior leaders with more practical and useful insight and information to help understand:

• How Consumer Duty has been implemented thus far in the firm and plans for the ongoing embedding into BAU?
• What are the key risks and constraints?
• What more needs to be done?

In the first Consumer Duty Annual Report due in the next few weeks then, many firms might well still be suffering from the piecemeal approach most companies employed when initially implementing the regime. The challenge now is to continue to review and evolve as firms continue to embed the regime in the months and years to come.

The Board Report is the ideal catalyst for this ongoing evolution, alongside more strategic initiatives that might seek to address some of the common failings of the implementation projects so far, things like:

• Incorrect scoping of the requirements, at the outset
• A milestone-led rather than outcomes-led project
• Inadequate assurance that the actual requirements were met
• Project teams disbanded too quickly, with limited oversight of day-2 issues
• Insufficient consideration of how Consumer Duty was going to be actually embedded within the firm, and transitioned into BAU

If firms fail to address these concerns, there is the potential that problems may continue to grow over time and leave the firm, and the Board, significantly exposed and non-compliant.

July 2024 is, therefore, the right time to assess whether the foundations and ongoing plans for Consumer Duty are sound. And Worksmart believe that Complaints data, Customer Feedback and, especially, Quality Assurance are the most material data themes linked to all four Duty outcomes. In our view, one of the first priorities for firms working towards embedding Consumer Duty should be to prioritise and ensure the necessary systems to gather MI and data across these three crucial data themes, enabling the mapping of data against each of the Duty outcomes and comparing outcomes between distinct groups of customers.

The Challenges Of Monitoring CD

Delivering Consumer Understanding and Consumer Support entails multiple ‘touchpoints’ throughout the customer journey. And, all of these touchpoints, either pre or post sale, need to support the delivery of good customer outcomes and the cross-cutting rules. Of course, firms can, and no doubt will, provide evidence such as Conduct Rules training, performance appraisal records, Complaints etc., that they are complying. In themselves, they are helpful. However, datasets like these come with major limitations:

Contextual: Data such as Conduct Rules Training records and Performance Appraisal are important but provide evidence of activities that support the competence of staff to deliver good customer outcomes, not evidence of the actual ‘delivery’ of good outcomes.

Historic: Data, such as Root Cause Analysis or Upheld Complaints, are ‘post event’, often only becoming available weeks or months after the customer interaction, and potential harm, has occurred. A good example of this is when conducting a review of business interruption claims handling in 2022, the FCA noted: “quality assurance reviews were too focused on the financial outcome of the claim rather than the full customer experience and failed to identify where customers experienced unreasonable delays.”

Please don’t get me wrong, data like conduct training records, complaints data etc., make important contributions to firm’s CD dashboards. It’s just that these types of data have their limitations.

Quality Assurance – The Missing Piece Of The MI Puzzle?

Quality assurance (QA) processes monitor key parts of the customer journey, so providing a vital, additional element to the firm’s toolkit in delivering good customer outcomes. So, what does in-process QA look like?

[1]Consumer Duty: firm preparedness: Wave 1: quantitative research (fca.org.uk) [1]https://www.fca.org.uk/firms/consumer-duty-information-firms [1] https://www.fca.org.uk/news/press-releases/fca-publishes-review-business-interruption-insurance-claims-handling

If done well, quality assurance will use a series of rules to identify which customer interactions to sample. Typically, these rules are a mixture of:

• Customer, e.g 100% of cases / interactions with vulnerable customers, 80% of cases / interactions where the client age is over 70.
• Product / Service, e.g. 100% of high-risk products / services, next 3 cases of advice or interactions for advisers / agents following a ‘failed’ check.
• Adviser / Agent, e.g. 100% checking for ‘high-risk’ and newly qualified advisers/ agents, 1 check per month for competent advisers / agents.?

Once identified, QA checkers run through the interaction, or case, e.g. checking that the combination of ‘customer – product – adviser/agent’ meets the firm’s risk rules. From working with client firms, these rules are usually set by a committee to ensure interactions fall with within the firm’s risk appetite, internal procedures and FCA regulation. These rules are then reviewed periodically, and sometimes adjusted, to ensure they remain the firm’s parameters.

QA checkers also review other factors, e.g. any required documentation is fully complete, that the listening recordings evidence appropriate behaviour by the adviser / agent etc. Where interactions / cases fall foul of the set standards, the adviser/agent and their line manager are contacted to ‘make good’ the situation, typically starting with contacting with the customer again. And if issues of competence are identified, remediation processes can be set in place.

Whilst in-process monitoring of QA standards has been common practice in many major financial services brands for many years, CD elevates QA to being a ‘must do’.

By inserting QA checks into key ‘moments’ in the customer journey, firms will capture four major benefits:

• Generate detailed MI about the quality of their key customer interactions (so important to evidencing ‘customer understanding’ and ‘customer support’).
• Provide reassurance to both customer facing staff and their line managers, that any risk their actions may cause to customer detriment is picked and dealt with up before the issue becomes are a major problem.
• A set of MI that staff in central teams can use to both monitor delivery of set standards, plus evidence of remediation.
• In their Final Guidance (FG22/5, 11.33), the FCA identified ‘Business Persistence’ and ‘File Reviews’ as two of the data sources firms may want to use monitor and evidence their conformance with CD, (another, barely disguised ‘nudge’!) Therefore, the fourth, and final, benefit is that inserting QA processes at key points in the customer journey will provide vital data to firms’ CD dashboard, and so provide that missing piece of the MI puzzle

?

Worksmart are UK’s leading supplier of software to manage Quality Assurance processes. With over 20 years of experience and many of the UK’s leading financial services firms as long-term clients, Worksmart have both the capability and technology to help your firm successfully implement and/or automate its' QA, Complaints and VoC processes. And if your firm doesn’t have experience of implementing processes like this, our regulatory consultants can help you from concept to go-live and thereafter.