"A predominantly paper-based disclosure may not meet today's consumer information needs", says the Financial Conduct Authority (FCA). It expects firms to be smart in their communication, knowing that consumers process information in different ways when making informed choices.
The FCA's FS16/10 presents a very detailed agenda of action to help you achieve that. And at the heart of this is the concept of treating customers fairly (TCF).
TCF and three key questions
Treating customers fairly is all about the consumer. The FCA has detailed various outcomes it expects to see from proper TCF: ensuring customers are confident they are being dealt with fairly, sold appropriate products which perform as expected, given clear information and suitable advice, and ensuring there are no unreasonable barriers to change, switch, claim or complain.
In turn, this can lead you to fewer complaints, increased loyalty, and a better reputation.
In FS16/10, the FCA notes that there are "challenges to effective communications. These include behavioural biases, low levels of financial literacy, and the complexity of products". Against this backdrop, firms should ask three simple questions:
- Are our communications clear?
- Are our communications really having the intended outcome and how can we put that to the test?
- Are there simpler and cleaner ways that we can communicate with consumers?
Making smarter communications
Consider the delivery method. Smartphones and the internet might have given people unlimited information in their pockets, but smart communication isn’t simply digitising everything.
For example, the FCA found that customers using mobile phones are unlikely to read a lengthy document. Think especially about vulnerable customers – those who may be particularly susceptible to a risk in a given situation. Some might need to receive information in paper, over the phone, or in person and you should not exclude them. Others, you'll no doubt be well aware, simply won't read anything on paper.
Be flexible. Offer information in larger fonts, audibly, through animation or video, infographics, other languages, or anything else that isn’t unreasonably expensive – whatever way you can think of that will be clear, clean, and simple.
Reducing time and reducing friction are not always the same; ‘quick and hassle-free’ is a double-edged sword when it comes to complicated products. It might not give a consumer enough time to understand what they’re doing, or suggest that it’s not a very important decision. There is an age-old balancing act when it comes to drafting your documents and explaining your features. The FCA is aware of this and is actively working to find industry good practice.
Design your communications carefully. Use plain language with short, understandable messages. Frame key information prominently, use images and graphics to direct attention or restate things. One size fits all is not a wise strategy when it comes to communications - design for a target group of consumers. In its latest mission statement, the FCA explained that more information is not always better when it comes to TCF. In fact, it's often the opposite.
Innovative ideas? Why not try it out in the sandbox? The first cohort has already been announced and the tests are successfully underway.
TCF is about much more than a list about communicating information to consumers in the correct manner, it’s about a culture that puts consumers at the heart of your decisions. Obtaining that culture is a long process, but there are definitely lists to help with that.
If you’d like any more information on consumer friendly documents, contact your usual Burges Salmon lawyer.
This article was co-authored by Nathan Dudgeon and Gareth Malna.