The UK’s Financial Conduct Authority (FCA) has been especially productive of late, with the significant legislation that is Consumer Duty launched in July and the Sustainable Disclosure Requirements and investment labels consultation approximately two months later. Fortunately, these complement each other greatly, particularly around the subject of consumer understanding and clarity of communications.
I applaud the Consumer Duty objective that firms re-examine their business through a consumer lens. This is a bigger ask than it might first seem but one that can really refresh and differentiate the flexible, dynamic business. This concept should underpin any work that forward-thinking firms may be doing relating to sustainable investment.
What value will current and future clients place on support with the following questions?
“How do I balance my personal financial needs with the global need to rethink and recalibrate current, economic, financial, industrial and social systems?
How do I invest not just for future financial security and comfort, but also for a physical environment that is secure and comfortable for me to live in?”
It’s a whole new conversation and a whole new way of thinking for many; one well worth figuring out initially in our own heads and then trying out among friends and then clients.
Another feature of Consumer Duty I really appreciate is the need for the Consumer Duty champion – a role I am personally enjoying with part of my working week. The champion is tasked with challenging and supporting, and ensuring the consumer lens shines widely and brightly.
Bridging the gaps
I would strongly advocate that the FCA also considers a “sustainability champion”. This could be a pivotal part of its rules regarding how IFAs should take sustainability matters into account in their investment advice and their understanding of investors’ sustainability preferences.
In my experience, developing a high quality, authentic and successful sustainable financial advice service involves the need to look at all areas of the business through the eyes of the consumer. There is a lot more to embedding sustainable options for clients than just picking investment solutions, even if these have a green label firmly stitched on.
Understanding a consumer’s knowledge and awareness of sustainability-related issues is hugely important and could shape the type of service the IFA offers to various client segments. Is a client a scientist or a professional in a construction, retail or engineering business and therefore potentially well versed in relevant environmental and social risks and opportunities? Or do they have limited knowledge of what sustainability means, even less so what role sustainable investment plays? Would they like you to educate them on this topic? Is this an element of your service they would value?
A sustainability champion could be a great person to lead on this. As part of a product governance framework, the distribution channel for sustainable investment products could involve a stop off with them.
Having looked at your sustainable service through the consumer lens, what then of your staff? It’s highly likely there will be different levels of knowledge, comfort and enthusiasm at play regarding the need to shift personal and corporate behaviours and investment habits. If this isn’t addressed, then the outcome of consistent, clear messaging won’t be met.
If the person building or researching the sustainable investment portfolio(s) isn’t on the same page as the marketer designing brochures and websites or the adviser one on one in a meeting, then you will get mixed messaging, misunderstanding and mismatching.
A sustainability champion, perhaps in conjunction with the T&C or compliance manager, can oversee how everything meshes together. This is not to say everyone has to hold the same views or use the same script, but they must deliver the same information and options to the consumer. A marketer and fund researcher will perhaps not speak the exact same language, but the champion can check if the difference just adds flavour or can spoil the dish.