Investing in the age of AI

Within its 2021 / 22 business plan, as part of its data strategy, the FCA committed to become a data led regulator and to become more innovative, adaptive, and assertive. This strategy was further supported with the appointment of a chief data, information, and intelligence officer, Jessica Rusu, whose role is to lead the transformation of the FCA’s ability to analyse and use the data and intelligence collected to efficiently and effectively oversee the firms it regulates. The FCA’s data-led approach is now a regular feature of its communications with firms.

We’ve seen a recent increase in the number of FCA surveys, including the one already issued on the Retirement Income Advice Thematic Review, and information requests aligned to ongoing advice services, a wealth managers and stockbrokers survey and a forthcoming adviser and intermediary survey to be issued this year. These surveys provide a large source of data and metrics for the regulator - and the industry - which, in turn, can be analysed and published to allow firms to benchmark their services against others in a way which should help demonstrate the delivery of good customer outcomes.

The introduction of the Consumer Duty requires firms to harness the benefits of data to track performance, identify areas of concern, improve their services, and understand the outcomes they achieve for their customers. The ability to analyse this data allows for proactive measures to improve customer outcomes and reduce potential consumer harm.

Whilst this may mean different things for different sectors, for intermediaries, the need for accurate management information to support data driven decisions has never been more important.

Whilst it can be frustrating and time-consuming, we know the FCA will be monitoring submissions and looking to identify trends. Good quality regulatory reporting should keep you out of the supervisory spotlight. With this in mind, we thought that it would be an opportune moment to highlight some of the key areas in which data and MI can support intermediaries in their objective to deliver good consumer outcomes.

Ongoing reviews

The delivery of ongoing reviews is a current hot topic but having a strong MI base can support a firm’s regulatory responsibility in the delivery of these services. Typical MI that can be recorded and analysed includes:

• The number of clients signed up for ongoing reviews
• The resource required to deliver these reviews
• The number of clients that have received the contracted number of reviews
• Number of reviews overdue, and by how long
• Number of attempts made to deliver the reviews
• Number of clients who have been offered refunds for missed reviews
• Number of clients who have either disengaged or moved to a different (reduced) service
• Analysis of the above at firm and individual adviser / client segment level

Ongoing reviews are a core component of a firm’s advice proposition and a key justification for the charging of ongoing fees. Being able to evidence not only that these reviews were delivered, but also how firms record and retain data on their ongoing review activity, is important.

Vulnerable clients

In addition to having a clear policy and robust procedures around the identification and management of vulnerable clients, analysis of data can identify areas to improve customer outcomes:

• As a firm, what percentage of customers are identified as vulnerable compared to industry norm?

• What types of vulnerability are recorded and what adjustments are required to improve customer outcomes?

• Are there any individual advisers who fall significantly below the accepted norm for identifying vulnerable clients and does this show a training or procedural issue?

Using this data allows firms to take a proactive approach in improving support for vulnerable clients. Benchmarking internal data of the number of vulnerable customers against expected vulnerable customer data numbers can help identify whether a firm is under-identifying vulnerability. Understanding the types of vulnerabilities most recorded enables firms to ensure relevant adjustments, such as communication support or tailored advice, are applied when interacting with customers with vulnerabilities.

Advice monitoring

Firms are expected to monitor and evidence that the advice they deliver leads to good customer outcomes. One of the most effective ways to do this is through advice monitoring. Ongoing file reviews and broader advice monitoring are critical areas where MI can be powerful. Examples include:

• Percentage of files reviewed per adviser over a defined period
• Breakdown of file review outcomes (e.g. compliant, minor issues, material concerns)
• Types of advice themes flagged (e.g. suitability, documentation, charges)
• Correlation of review findings with customer complaints or redress cases
• Instances of repeat issues by the same adviser or advice area

Regular file reviews are an important component in advice monitoring, enabling firms to assess the quality of advice delivered. MI such as the above allows a firm insight into whether there are any issues with adviser training or competence and whether there are any potential areas of advice that pose a risk to the firm.

Client feedback

Client feedback is a valuable indicator of outcome delivery. Under the Consumer Duty, firms must not only act to deliver good outcomes for retail customers but also evidence that they are doing so. One of the most direct ways to demonstrate this is by using client feedback. This can include getting both qualitative and quantitative insights from those to whom the firm delivers their services. MI examples include:

• Net Promoter Score (NPS) trends over time
• Satisfaction scores split by service, adviser, or client segment
• Volume and themes of complaints or expressions of dissatisfaction
• Response rates to feedback requests and levels of engagement
• Changes made to services as a direct result of client input

Client feedback transforms Consumer Duty reporting from a compliance exercise into something which can be evidenced by those to whom your firm delivers its services, ultimately improving customer outcomes and reinforcing the value of advice.

In summary, data is no longer a ‘nice to have’, it is a regulatory necessity. Embedding MI into every level of the business helps ensure that decisions are well-informed and give an indication as to whether consumers are receiving outcomes in line with their financial objectives. With a proactive and structured approach, firms can turn data into one of their most powerful tools in delivering against the Consumer Duty and future-proofing their firm.

Get in touch:

www.simplybiz.co.uk
01484 439100
info@Simplybiz.co.uk