In October 2016, the FCA published their Smarter Consumer Communications feedback statement. For a paper that’s looking at how to improve communications, it’s a pretty dull read. But never fear! A like minds summary is here.
What’s it all about?
The FCA launched their Smarter Consumer Communications initiative to bring about an industry-wide change in the way information is delivered to consumers.
So it’s about how financial information can be communicated to consumers who are using new technologies that are changing the way they read and engage with information.
Long story short, it appears that a 20-page paper booklet that’s written in size 8 font and full of legalese doesn’t cut it any more (gasp!). People are looking for more from their financial communications, and it’s no surprise that they’re moving towards digital and tech-driven solutions.
The FCA believe that this ‘requires a fundamental change in mindset about how to communicate effectively with consumers’ within the industry. This initiative is aiming to encourage firms to do a better job of communicating with their customers.
What did the FCA do?
A number of high-profile companies like Royal Mail, British Gas and Which? responded to the FCA’s 2015 Discussion Paper and through their responses, the FCA identified four key factors that limit innovation and quality of financial comms:
- Uncertainty around regulatory bodies’ expectations
- The prescriptive legislation
- Multiple regulatory bodies leading to confusion around what to communicate
- The general complexity of financial products
These firms also provided the FCA with examples of what they thought were effective consumer communications.
What did the FCA find out?
Quite a bit. There are a few key points we’ll pull out now, but for a full version of the (52-page) feedback paper, you can click here.
- Good practice and a flexible approach is key: clear, simple information and explanations help build trust with a consumer who is used to being confused by financial communications.
- Technology has ‘transformed’ the way consumers engage with financial services. It’s changed the way they ‘research, choose, buy and use financial products’.
- The FCA believes that the best way to achieve consumer engagement is to have an industry-wide rethink. It’s not just about what’s being communicated (as long as the legal requirements are met, the communication serves its purpose). It’s also about the ‘how’: does it engage and inform the consumer? Is it keeping up with the way consumers want their information provided?
What’s like minds’ take on it?
The FCA’s paper talked about the cognitive biases identified by literature on behavioural economics. These are things we’ve been talking about for a little while at like minds – things like framing information and the idea of members having a ‘present bias’.
So, this isn’t really news to us here. But it’s interesting to see that the approach we’ve been taking is supported by the regulating body’s findings.
Consumers are looking for digital solutions to their financial confusion problems. They want bitesize, easy-to-understand information that gives them what they need quickly and simply.
Financial products are compared and bought online, and a recent study conducted by LV= found that the first place the people surveyed go for financial information or guidance is good old Google, and not their Scheme guide or provider documentation.
The FCA identifies that it’s no longer about ‘what’ is communicated, it’s about ‘how’.
But we think it’s just as much about the ‘why’? Why does a consumer want this information? Will it help them make better decisions, feel more in control of their finances, end up with a comfortable retirement?
What’s in it for the consumer? Making sure that message doesn’t get lost while everyone adapts to delivering the information differently is key.
This will present some challenges to an industry whose communications are often still bloated with jargon, caveats and small print.
While it’s great that the FCA have recognised the need for smarter communication, it’s time to start putting that into practice. That will mean being a bit brave and changing the landscape to support a world of clear, simple commuincation.
We’re pretty good at that here at like minds, so we’ll be expecting a call from the FCA any day now!