How the new Consumer Duty regulation is only the first step in our drive to enable people to better understand the choices they face in life.

This week has seen the Financial Conduct Authority (FCA)’s Consumer Duty regulation come into force. It has been billed as the biggest shake up in Financial Regulation for decades.  

If you have been living and breathing Consumer Duty for a while now, as we and our FCA-regulated Plain Numbers Partner firms have been, then you will know that the deadline this week is by no means the end of the journey.  

The FCA has been clear that their new outcome focussed regulation is not a box-ticking exercise. Instead, it is an opportunity for firms to prioritise and embed a focus on consumer outcomes. Consumer Understanding is at the heart of this, and we at Plain Numbers are excited by the opportunities this focus presents for both consumers and firms.  

The deadline of the 31st July is only the beginning of the journey. The FCA has been clear that it expects firms to keep the Duty’s requirements at the centre of their approach and culture. The FCA will be expecting firms to continue implementing their plans, learn from what they’ve done, and continue to improve.   

Consumer understanding is a tricky area to grapple with, and it is not a case of a ‘one size fits all’ answer to what ‘good outcomes’ look like. Firms must be able to demonstrate that they are continually taking proactive steps to ensure that customer understanding is improving.  

There is no magic number to aim for in terms of how many consumers should understand a certain communication, indeed the Plain Numbers Randomised Controlled Trials showed that the base level of consumer understanding is remarkably low. For example, in one trial we found only around 1 in 8 people could answer at least 4 out of 5 basic comprehension questions correctly, and at best only just over 1 in 3 people were able to. When the Plain Numbers Approach was applied to all these tested versions there was a marked improvement in comprehension – with customer understanding doubling on average.  

We have been incredibly impressed by all our FCA-regulated Plain Numbers Partners’ work to improve their communications. Many have included their work with us as evidence to the regulator that they have a proactive approach to improving consumer understanding. But this week's deadline isn’t the end of anything, it is in fact the beginning of a journey to enhance customer understanding.  

It is crucial to remember that from now on the Consumer Duty is the lens through which the FCA will view everything, from policy development to enforcement. They have already set up the Consumer Duty intervention team and have included the substantive requirements of the Duty within consultations on other regulatory updates.  

A firm who can show that they are actively engaged in embedding a real cultural change, and a step change, in customer understanding will put itself in a strong position to meet the requirements of the Duty. There is a fantastic opportunity to continue to build their business around enabling people to better understand the choices they face in life – and the growing Plain Numbers team are all here to help them to do this.