The rules and principles which apply

The Consumer Duty understanding outcome requires that customers receive clear information and are appropriately informed to enable them to avoid foreseeable harm and to enable them to pursue their financial objectives.

ICOBS 5.3.1 requires that firms take reasonable care to ensure the suitability of the advice they provide to any customer who is entitled to rely upon their judgement. Advice provided to customers must therefore be suitable taking into account the nature, scale and complexity of the product and its features and individual customer circumstances.

The Consumer Duty support outcome is also concerned with customers being able to realise the benefits of the products and services they have purchased as they have been led to expect.

The practices of intermediaries and their role in the provision of advice and information – both at point of sale and in after sales customer support – therefore, remain a significant area of focus for the FCA.

How this may affect you

As well as ensuring that advisers are appropriately trained for the products on which they advise and are fully aware of, and follow, the appropriate rules and guidance, firms should continue to review their sales and advising processes from a customer outcomes perspective and to monitor their success through appropriate management information (see Section H.3).

Some of the key issues firms should consider within the sales process are:

• Ensuring that the basis on which the firm advises (i.e., advised or non-advised, fair analysis, limited range or single provider) is accurately reflected in the firm’s Terms of Business and made clear to the customer during the sales process.
• Recording customer classification (i.e., consumer or commercial customer).
• Discussing and noting customers’ circumstances and objectives as well as merely entering data.
• Conducting a thorough fact find, collecting all relevant information to the risk, and checking any details already held about the customer.
• Asking about any relevant existing insurance.
• Ensuring that advisers check the level of a customer’s understanding and are able to explain key issues such as exclusions, limitations, material facts and the consequences of non-disclosure in clear terms, without using jargon or complex industry or legal terms.
• Ensuring that the customer’s attention is drawn to information about charges and any other costs and that such information is given in an easily understandable format (as part of the quotation and/or within the firm’s Terms of Business prior to conclusion).
• Suggesting to customers, as a sale or amendment is taking place, that they might like to make a note of certain significant information or ask questions about anything which they do not fully understand.
• Ensuring staff are able to deal with ‘out of the ordinary’ requests and clearly explain any misconceptions voiced by customers.
• Building in safeguards to ensure that advisers clearly explain and highlight when an additional product is being recommended so that customers do not buy additional products believing them to be compulsory or essential, e.g., legal expenses and other add-on policies, and that customers understand whether an add on is being offered on an advised or non-advised basis.
• Ensuring that all documentation relating to the sales process is written in plain English and that key issues such as significant exclusions, material facts, and any demand or need which cannot be met are given appropriate prominence – see document CBC09 for examples of quote letters.
• Considering the requirements applicable to Contract Certainty and how meeting the Code of Practice will be recorded and monitored.
• Documenting the source of business (i.e., where business is introduced to the firm by a third party).

We recommend that firms produce a written sales process or script for staff to follow. The process should be sufficiently clear that it sets out a standard for the business but flexible enough to cope with issues such as the different products offered and the different types of customers dealt with including their varying levels of experience, knowledge and vulnerability. Firms may also wish to Include specific service and quality levels (including timescales) in the written sales process providing internal standards against which the performance of staff and the robustness of the sales process may be measured.