How wealth and asset managers should respond to the new FCA Consumer Duty

New plans from the Financial Conduct Authority (FCA) for increased consumer protection for financial services users, through a “fundamental shift in industry mindset” are to be confirmed by the end of July 2022.

The proposals include a new Consumer Principle that “a firm must act to deliver good outcomes for the retail consumers of its products”.

The regulator’s Consumer Duty directive is the latest in a series of measures tackling consumer needs in the financial services and wealth management sectors.

But how do the latest rules impact wealth and asset management firms? And how can a more effective use of data help firms increase customer knowledge and drive business growth, while ensuring compliance with the Consumer Duty?

How does the Consumer Duty impact wealth management firms?

Banks and building societies have moved steadily towards digitisation and customer-first policies over the past decade, but the wealth and asset management sector hasn’t moved as quickly.

While some firms have already adopted a business model that enables customer-led and technology-enabled strategy, it is only in the past 18 months that the importance of a data-led approach to wealth management has become prominent – and many firms are still playing catch-up. The Consumer Duty may well act as a catalyst for many to speed that change along.

The FCA is worried that, currently, financial services do not always work well for consumers, who are buying products and services that are not always fit for purpose, and not continuously receiving the best customer support.

Consumer Duty creates a shift towards making firms more proactive about the suitability of their products and services, to directly meet the needs of those they are sold to.

Wealth managers, along with other financial services firms, will need to improve consumer understanding, review the entire consumer lifecycle and journey, revisit how and what to include in customer marketing, and establish new ways to measure all these areas, in order to remain compliant.

“The new duty will drive a change in culture at firms. We expect firms to step up and put consumers at the heart of what they do, and we’ll be holding senior managers accountable if they do not.” warned Sheldon Mills, Executive Director of Consumer and Competition at the FCA.

Customer marketing – who are the new prospects?

Clearly, the FCA wants firms to better understand their customers. But how do wealth and asset managers do that? What steps do they need to take to make their business fit for purpose in a digital world and comply with Consumer Duty?

Regulatory pressure provides an opportunity to capture the market – collecting data and enriching it in order to tailor distribution and marketing.

Wealth managers are seeing changes in both customer behaviours and types of customers, and are moving away from the traditional investor to hunt out wealth in other areas – as they fight for market share. Meanwhile, fintech disruptors are raising the bar with innovative offerings.

Consumer insight is key. Young investors who are creating or inheriting their own wealth are increasingly important, as the older consumer market depletes. They are joined by more entry-level investors – and both personas have very strong customer service expectations.

These younger, and often more knowledgeable, investors are the customers of the future. They know they can invest quickly and easily online and they expect the same level of speed and ease of use in all their financial dealings.

A data-driven customer experience

Firms need to better understand the current and future needs of investors, those who might have a sophisticated, historic book of customers, now need to reach a broader audience – and CACI can help firms do that.

Consumer Duty firmly indicates products need to suit their customers, and firms need to be where investors can see them in order to market more broadly. Changing expectations might include more sustainable or green investments.

Those firms that recognise the need for better customer understanding are starting to bring in people with wider customer-first experience from other industries – increasing the sector’s pool of knowledge.

It is key to firms’ long-term growth that they do more with consolidated data – because if they don’t, they can be sure their competitors will. Firms will have data on customers, but many don’t know how to make the most of it.

At CACI we can help firms:

• Understand their customers
• Understand the market and identify opportunities
• Know where potential and current customers are located, and their value

We can help brands across the wealth management, asset management and financial services space with demographic data and behavioural insights on investors.

Wealth and asset management firms looking to grow their business need to consider the importance of over- arching information and scalable transformation. Rich demographics on lifestyle, attitude and behaviours in the investment market, can empower better target distribution activity – driving revenue growth and increasing client engagement.

CACI will:

1. Provide detailed understanding of current investor behaviour needs and growth opportunities
2. Quantify the acquisition opportunity across regions to inform growth and investor engagement strategy
3. Enable optimisation of marketing performance across channels
4. Improve distribution performance through digital direct and intermediated channels
5. Demonstrate compliance with Consumer Duty to show that they are looking at, and understanding, customer needs

If you are interested in reading more, download our latest whitepaper ‘Acquiring new high net worth clients – What wealth managers need to know‘.

Or if you would like to find out more about how we can help, explore our services or get in touch.