Culture change can turn the Consumer Duty to the IFA’s competitive advantage 

by | Aug 10, 2023

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There is no doubt that the next 12 months will be a testing time for IFAs. The Consumer Duty kicked in on 31 July and now the FCA is ready and waiting to enforce the new regulations.  Jane Sparrow, The Culture Builders, is encouraging advisers not only to think positively about this brave new world but to channel it to their advantage as she explains in this blog which Jane has kindly written for IFA Magazine:

For IFAs reading this, you are already well-versed on the requirements to comply, and have your implementation plans in place. Scrutiny of all existing and new products is now under way, and products and services held in closed books will fall under the new rules in July 2024.

IFAs are nevertheless concerned about the implications of the Duty, according to the recent survey by Opinium. Among the findings, one in seven (15%) IFAs interviewed said they were still unclear about advising clients on good customer outcomes, and the FCA has come under criticism for being unhelpful or unclear in its role in the implementation.

 
 

This significant industry shift has not been the smoothest of transitions and the evidence tells us that some firms are adapting to the regulations better than others. For those IFAs that are successfully adapting, however, the new rules are an opportunity and they will gain a competitive edge. As consumers become more aware of the Duty (the survey stats show many of us are still unaware of the new rules), some firms will respond brilliantly and thrive as a truly consumer-centric business, living and breathing it.

Who will thrive and who will struggle? Various factors are at play in deciding which firms best respond to the Duty in the coming months, including customer communications and product design. For sustained success, however, there is one that has already been highlighted as a critical area for IFAs and other financial service providers: culture. For the individual IFA, this can simply be read as your professional values, beliefs and behaviours.

The FCA said it itself, that ‘culture is critical to delivering good outcomes for customers’. It lists four drivers – purpose, leadership, people and governance. Now, for many firms in finance, a focus on work culture is nothing new. Good organisations understand the importance of teams buying into common values and behaviours and pulling in the same direction. The Duty is challenging firms to put the customer front and centre of business and to do so, the FCA is saying, your whole organisation must be on board.

 

Whether your firm has long been a fervent believer in building a strong work culture or not, there is little argument over the important timing of this enforced focus on the customer. The cost of living crisis, with inflation and soaring interest rates, has heightened people’s anxiety about making the right choices with their money. More widely, the global drive towards business being a force for good is gathering pace.

Opportunity knocks

Culture change, of course, just doesn’t happen overnight. It can often take time and lack a sense of urgency yet with the FCA involvement, that need to act fast is now firmly in existence. And for those IFAs most effective at the switch in mindset, the Duty is an opportunity to differentiate and position, and achieve a competitive edge.

 

How do you do this? My advice is to consider what I call The Three Pillars of Culture.

These three pillars are:

– What we believe

 

– How we behave

– What we use

I believe these are crucial for creating a customer-centric organization as I will explore now:

 

What we believe’

This is a focus on what you believe as a team (or individual) and an organisation. It encapsulates your values, purpose and core beliefs. It is the why. So with the Consumer Duty, rather than seeing it as just another added risk and compliance burden, you consider it an opportunity to further build customer loyalty and retention. Its a chance for you to reconnect with what matters to your customers.

How we behave

 

Here, it’s all about he language you use, your actions and your behaviours at work. By ensuring that the behaviours of your people are aligned with your organisation’s beliefs, you can initiate and sustain a culture shift towards genuine and long-lasting customer-centricity.

What we use

And finally, this element focuses on implementation and concerns the systems, structures, technologies and work environments that enable your business’ beliefs and behaviours. Its important that organisational beliefs and behaviours are aligned before any supporting systems are implemented.

The Consumer Duty was introduced to tackle sector-wide issues, and it is having an impact right now on IFA firms and individual practitioners. The Opinium survey tells us that the FCA has work to do as an adviser to IFAs as much as being the enforcing body. In the end, however, the regulations will be a huge opportunity to the firm that successfully adapts its work culture, or its values, beliefs and behaviours. The firms that respond best will win business because customer-centricity is very much part of their DNA.

About Jane Sparrow

Jane is passionate about enabling others to perform at their best to achieve both organisational and personal goals and has worked with businesses across the world, including Centrica, Edinburgh Napier University, UKTV, Sony, Lane Crawford and HSBC, to create high performance teams and cultures. Jane is a Poly-working and organisational culture expert, co-founder of The Culture Builders, three times published author, MBA programme contributor and thought leader for Cambridge University’s Prince of Wales Business and Sustainability programme.

 

 

 

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