This information from the FCA’s Head of Competition Policy will help you understand three new elements to the Consumer Duty price & value outcome.
As we know there are four outcomes to the Consumer Duty:
- the products and services outcome,
- the price and value outcome,
- the consumer support outcome
- the consumer understanding outcome.
The one that seems to be causing the biggest ripple, particularly in the pinks, is the price and value outcome.
Recently, the FCA have provided further insight about the price and value outcome through their Inside the FCA podcast with the FCA’s Head of Competition Policy, Ed Smith.
Attached here is a transcript from the podcast, but to summarise in the talk he shed more light on the product and value outcome that firms can use to help steer the direction of their own Consumer Duty planning.
Smith mentions certain advantages that companies can use when selling products such as behavioural biases, i.e. flashy upfront discounts to hide the true cost of a product or customers’ natural inertia, where customers have been with a product for so long that they may no longer benefit from it.
One of the themes of the podcast and Consumer Duty more broadly, is putting the onus on firms to examine and challenge themselves about whether products are a reasonable cost compared to the benefits the customer receives.
The FCA expects firms to assess the price customers pay for the product over time as the price can be contingent on the way a customer uses a product, i.e. they might get fees throughout the lifetime of the product or they might pay commissions throughout its lifetime.
This will require firms to look at the price and value equation up front and throughout the life of the product.
Smith broke this outcome into three elements.
- The first element is the benefits of the product itself compared against the cost that a customer pays for the product including not just the upfront price, but also contingent charges throughout the product’s lifetime.
- The second element of a good value assessment framework is identifying the different customer groups. Different customers will use products in different ways which will affect not just the costs that they incur, but also the benefits that they receive.
- The final element of this value assessment is to look at what is driving the price both at a firm and at a market level. And here it can be quite useful to see how the price of the product has moved over time.
At the Timebank we are assisting firms in implementing the above requirements tailored to their firm’s needs, so do get in touch if you think your firm might benefit from the same.