'I'd be worried if data came out as a theme in closed-book consumer duty'

The director of policy and communications at Royal London plays down concerns raised by the Financial Conduct Authority about potential gaps in client data held by firms, which he says should be able to provide any data necessary.

The FCA in April said it had concerns the data firms hold about their customers could be incomplete.

It told chief executives they should be taking steps to make sure basic details are held and proactively work to fill any gaps found. 

Vaughan Jenkins, managing director of partnerships at Moneyhub, says his firm has already seen businesses "struggling with data sufficiency and quality to comply with the duty".

"Most of the initial work that firms have completed is also reactive and backward-looking rather than proactive and helping customers to avoid foreseeable harm," he tells FT Adviser, adding closed books, by their nature, present even greater difficulties for firms.

But Royal London's Jenkins says he would be "worried if that came out as a theme", because firms have always had a responsibility to look after and be able to service their existing clients.

The first phase was the big one really.

Jamie Jenkins, Royal London

The deadline for complying with the next phase of the consumer duty is the end of July, when providers will need to assess the inherent value of their closed book contracts over newer ones with more functionality.

"The first phase of it was the big one really," says Royal London's Jenkins. "The second phase of it, a lot of that will be about data and older products – legacy issues."

While the first phase of the duty was about looking at the customer journey and whether products were working as intended, the next phase will see providers assess whether there are better and more modern contracts they can switch their closed-book customers to.

It will be a case of weighing up the benefits of the older products – which can be significant and no longer available, such as certain guarantees – versus their limitations.

It will be a big task, says Jamie Jenkins, but he says he does not expect it to result in a lot of switching, at least not immediately.

"I wouldn't sit here and say it's easy for the industry to do that. It's a big task because it's many, many layers over many years of different products. 

"But I mean, every large provider will have that challenge. And we'll be going through that.

"I don't think there'll be a lot of movement right now. There's a lot of complexity to that and there's a lot of decision-making that will need to underpin it. But I do think over time we'll start to see a lot of those [products being switched]."

The question mark, he said, was whether there would be an easy route to switching to a new product.

"And that's where I think the FCA is going to look at it and say, 'Okay, people have got good products; where they don't have good products, is there a route for them to change or modernise that in some way?'"

Cultural shift

The consumer duty has created a cultural shift in the industry, away from treating customers fairly to treating customers well, which far from being a tick-box exercise has been fully embraced by the industry, says Royal London's Jenkins.

He says it had been positive and "strategic" and well thought through.

"It's not felt tactical from the FCA. If anything, the tactical stuff has come from government and the more strategic stuff is coming from the FCA.

"I think they've taken their time, they've consulted well, and you know, they're looking at strategic change rather than tactical intervention. And that's really welcome."

He adds: "You can criticise regulators for a lot of things, but I think in recent years, it's shown that it's got some strategic outlook and it's trying to drive things forward more positively."

Most of the work the FCA has done since, such as the retirement advice review and advice guidance boundary review, was done in the context of consumer duty, he says, adding that this further emphasises that there has been a cultural shift across the board.

Even if you don't make any changes to a product, the function of reviewing that whole journey is a big piece of work

One area where there have been lots of changes has been communication, he says.

"There has been a complete review of all the communications I think across the industry, people have sat down and said, 'Okay, what's the product – are we clear on who is using that product'.

"Is it the right target customer for that product, is it suitable, is it performing well, and indeed, how are we communicating those things?

"And are those communications clear, fair, not misleading? And where there are changes, you know, those changes have been picked up." 

The difference, he explains, is now firms are looking beyond just treating their customers fairly at the point of sale, at what happened after they bought the product, whether it was a good outcome.

He says he would not expect consumers to have noticed the difference, however.

"If that were as stark a difference right through to the consumer, to see that you would think, 'Well, what were we doing before that?'"

Two phases

Jamie Jenkins says the fact the deadlines for different phases of implementation were spread out over a year was "quite helpful because there's probably quite a lot of learning across the industry from the first deadline and the assessment of value work that was done and how that now translates into looking at closed book-products".

The first phase has been "a big change project", he says. "Because even if you don't make any changes to a product, the function of reviewing that whole journey is a big piece of work.

"So it's a big change project to review all those journeys across all of your products for all of your customers and, you know, the more complex your business, I guess the wider that piece of work is."

A big exercise, but worth it.

Jamie Jenkins, Royal London

He adds that consumer duty has broadened the thinking across the value chain, prompting advisers to consider their own charges as well as those of products and functions they might not need.

"Advisers are now asking for more sort of segmented client data from providers to say tell us a bit more about who we have and how things are performing and obviously been asking us for evidence of the assessment of value work that was done first time around – and again, they want to know and review those sorts of things with products again this time around," he says.

"Advisers are simply more data hungry than perhaps they were before, because they know they've got to fulfil their own duties."

He adds: "I think it's a good exercise because if you combine that with all the data requirements on the dashboard, for pensions, particularly, you think those things go hand in hand quite nicely, reviewing the product and its suitability and its sort of competitiveness, but also making sure the data is up to date.

"It feels like it will help move the industry forward and increase trust. And that's got to be a good thing. So a big exercise, but worth it."

carmen.reichman@ft.com