Financial services firms must urgently review their IT systems and processes for managing customer vulnerability, experts warn as new independent guidance sets higher standards and is adopted by the Financial Ombudsman Service (FOS).
The new guide released by the Chartered Insurance Institute (CII) and Personal Finance Society (PFS) sets out clear guidance for firms across insurance and personal finance to address existing knowledge gaps and challenges associated with vulnerability management. The guidance, which has been extensively peer-reviewed, is designed to give all financial services firms a practical action plan to embed the principles-based guidance of Consumer Duty.
In particular, the guide focuses on the necessary IT systems, processes and data infrastructure required by firms to identify, record, monitor and report on both customer vulnerabilities and consumer outcomes. The guidance builds on the FCA’s move from prescription to “principles with proof”, requiring firms to evidence better outcomes and wider compliance with Consumer Duty.
Andrew Gething, managing director of vulnerability specialists MorganAsh, is urging firms to not only embrace the new guidance, but review and take action on IT systems and processes, particularly as the guidance now becomes the de facto standard for the Financial Ombudsman Service (FOS).
Gething argues that firms that are unable to align their systems with this higher benchmark will find it increasingly difficult to defend complaints, evidence good outcomes or demonstrate regulatory compliance. He also warns that firms will be unable to unlock the commercial benefits of improving products and services, and knowing customers better.
Andrew Gething, managing director of MorganAsh, said: “This new guidance marks a significant step forward in the ability of firms to not only embrace and embed the principles-based guidance of Consumer Duty, but manage customer vulnerability effectively. It quickly becomes clear that the right technology and processes are absolutely critical in achieving this and the guidance clearly sets out what good looks like for firms to be able to identify, monitor, support and report on customer vulnerability and consumer outcomes.
“This higher benchmark now becomes the de facto standard for the FOS and means that firms must interrogate their current IT systems and processes to ensure they cut the mustard and take action if they don’t. If a firm’s approach cannot demonstrate how they identify and support vulnerable customers – with suitable evidence – they won’t just be out of touch with best practice, they will be out of line with what regulators and the Ombudsman will expect. That’s a hard place to defend from in the case of an active complaint.
“Thinking more about the carrot than the stick, rising the meet to this new benchmark will give firms access to robust data and significant intelligence. Not only is this essential in delivering good customers outcomes, but it will enable firms to adapt, personalise and improve their products and services, and know their customers better – unlocking a significant competitive advantage and the real commercial benefit of embracing Consumer Duty.”
MorganAsh is a specialist in Consumer Duty and customer vulnerability. The firm launched its multi-award-winning MARS platform to help firms understand and monitor vulnerable customers and deliver good outcomes – as required by Consumer Duty. It is in use across financial services and the utilities sector, enabling businesses to adopt a consistent approach to identifying vulnerable characteristics and generate an objective Resilience Rating – much like a credit score.
The MARS platform meets the system requirements set out in the new guidance, providing financial services firms with a proven tool that can be used as a standalone system or integrated into other systems via an API (application programming interface).
The guide is available for download from the CII.
