Smith gave the example that it might be a failure of communication or a case of consumers not understanding the product they are using, in any case the firm will need to find these root causes and come up with a strategy of change.
He explained the type of information a firm will need to gather will depend on factors like the size of the firm and its client base.
“We're going to be pragmatic and open in working with firms to develop the data and analytics to demonstrate that compliance.
“We don't expect them to have all of it on day one. As long as they can evidence good outcomes from day one, but then have a strategy to develop the data that they need to really understand those better in the future, that's fine and they can work with us,” Smith said.
The FCA’s finalised guidance, which was published last July, gives examples of the sort of data firms should consider.
This might include things like customer retention records, complaints, cancellation rates, and both formal and informal customer feedback.
On top of this, the FCA wants to see firms document an underlying root cause analysis for bad outcomes.
Smith also noted that listening to staff feedback is an important step firms should take.
“Often staff have very good, frontline knowledge and understanding of where customers are finding it difficult to navigate a product, where they’ve got complaints or issues with the product or the processes that they have to work with.
“Listening to that staff feedback is often quite useful to understand what the customer outcome is and what the customer experience is,” he said.
Different outcomes for different groups
The FCA expects firms to be able to monitor distinct groups of customers to see whether they might be receiving worse outcomes than others.
Smith gave the example of long-standing customers who may not switch around as much and are therefore more prone to get “poor back book outcomes” - ie, the product value becomes less good for them because they have not switched.
Similarly, he spoke about how the FCA is conscious of the poverty penalty, where customers pay more because they haven't got enough available cash, which he noted is a common issue in financial services.
“Where there are differences in prices charged to different groups of customers, firms need to consider whether the price charged to each of those groups provides fair value to those different customer groups.
“They need to be aware of those differences and understand those differences and satisfy themselves that those differences are appropriate for fair value,” Smith said.
