The incoming Consumer Duty requirements from the Financial Conduct Authority (FCA) give firms an opportunity to take ownership of “data-driven innovation” which must be accelerated to ensure compliance with the rules, according to a Dunstan Thomas white paper.
The fintech's paper, Consumer Duty: A recipe for change highlights the threats and opportunities the rules pose for pension product providers and adviser platforms.
The Consumer Duty imposes new outcomes-orientated demands on the pensions market which mean participants must provide better support to customers and ensuring they are in suitable investments for their life stage and current risk appetite, Dunstan Thomas explained.
Firms have six months from the end of July 2023 to ensure the duty is met for existing customers.
The paper said Consumer Duty gave firms the opportunity to take ownership of available customer data to drive better outcomes.
Dunstan Thomas director of retirement strategy Adrian Boulding said: "The new duty regulation will give firms an opportunity to take ownership of data-driven innovation which must now be accelerated.
"The FCA will want to understand how firms are achieving good consumer outcomes by finding out if firms are using all the data available to them to ensure that better outcomes are being delivered to all their customers."
Understanding
The white paper explained that the four key Consumer Duty outcomes focus on "ensuring consumers understand the features, charges and benefits of the products they have put savings into". It added that it is no longer adequate to send statutory compliance documentation and "hope that it is read and understood".
Dunstan Thomas said: "Providers will need to check that documentation has been read and even whether it has been understood."
It added this was possible through digital document delivery, via secure portals for example, which made it possible to check engagement and understanding levels.
Boulding commented: "Many of the ecommerce ‘nudge' tools which were developed to optimise sales on consumer product websites can now be adapted by financial product providers to meet duty requirements.
"For example, what about adapting an ‘Abandoned Cart' tool to reconnect with customers that are over 60 and have explored your decumulation options pathways, made some selections in one of your planning tools but then abandoned the session?
"An opportunity could be created to provide feedback on why they decided to take no action - uncovering whether they have a good understanding of their options, have recognised they have a savings shortfall or some other dependency which has led to the customer getting stuck."
The white paper sets out a series of digital tools which could help providers meet Consumer Duty requirements, including a value for money assessment tool, which it said would appeal to regulators.
