Written by Richard Bassett, VP Digital & Analytics, NICE International
The Financial Conduct Authority’s new Consumer Duty has now been in effect for three months, putting increased pressure on financial firms across the UK. Financial advisers have an important role to play at the intersection of consumers, providers, and financial products.
From client-facing documentation to client interactions including emails and calls, IFAs must be able to facilitate clear, transparent communication that puts the needs of clients first and recognises vulnerability.
For many IFAs, the notion of fairness and safeguarding positive outcomes is already well-established. Clarity and transparency are core to an effective service offering. But with more robust requirements, less room for error, and a growing reporting burden, manual processes and cultural efforts alone may no longer be enough.
Going beyond processes and frameworks
To safeguard consumers and deliver positive outcomes, most IFAs already have detailed processes and frameworks in place. However, vulnerability is complex, and these processes depend on manual handling by observant and life-experienced advisors – leaving considerable potential for vulnerability to be missed.
In addition, the way IFAs interact with their clients is changing. Many clients now move between traditional and digital channels and, in turn, the information you need to assess, and identity vulnerability becomes distributed. Simply put, it’s harder for advisors to identify those who are vulnerable, even if your processes are highly developed and specific.
AI and analytics enable a more comprehensive approach where every factor is considered, and nothing is overlooked. Every interaction, via every channel, can be analysed, understood, responded to, and reported on. This gives IFAs a holistic view of how they align with their Consumer Duty responsibilities, while uncovering compliance risks based on their data.
Using AI and analytics to achieve Consumer Duty compliance
AI can be applied to the delicate task of identifying vulnerable consumers, which is a significant part of embedding fairness and increasing access. The number of vulnerable consumers in the UK is increasing as a result of economic challenges and rising costs, but these consumers won’t always self-identify as vulnerable, or even speak to an advisor.
The advantage of an AI-driven predictive model is that it can automatically analyse and create a vulnerability score for every interaction, based on the FCA’s four drivers:
1. Health
2. Resilience
3. Life events
4. Capability
As a result, IFAs can analyse every interaction based on these drivers, ensuring they deliver the fair outcomes mandated by the Consumer Duty.
Supporting advisors
IFAs can also use analytics to provide timely advice on acting in line with the Consumer Duty rules. This includes interaction guidance and contextual recommendations on the most appropriate next actions for a given conversation. This data-driven approach ensures they remain on track.
Better still, analytics can help with coaching, allowing senior employees to assess every interaction against the Consumer Duty regulations and determine whether or not a good outcome was delivered. If not, you can automate remediation workflows by FCA driver and track resolution.
Achieving and evidencing your compliance
With the right analytics solutions, IFAs can use data-driven insights to identify risks and compliance gaps sooner, then implement operational changes and monitor their impact. A holistic approach to data also supports compliance, surfacing relevant information for accurate, effortlessly produced reports. As a result, IFAs can prove their ability to identify vulnerability, handle complaints and deliver fairness at scale, throughout the entire client journey.
A strategic approach to Consumer Duty compliance
Over the next twelve months and with a second deadline looming, we will see how the FCA begins to enforce its new requirements. No doubt the penalty for non-compliance will be fines, an issue for all financial firms as the number of vulnerable consumers grows. Every IFA will need to take a strategic, proactive approach, quickly identifying the signs of vulnerability and responding effectively.
Before the Consumer Duty, IFAs were already on the frontlines of providing positive outcomes and safeguarding fairness. Now, there’s even less margin for error and an increased need to formalise these priorities. And as enforcement begins to gain pace, the right technology will be an asset in working fairly at scale.
