| UK & Europe | Articles
The FCA’s first review of complaints since the Consumer Duty has cast doubt over the effectiveness of firms’ governance, management information, and root cause analysis. While the regulator identified some areas of good practice, its findings demonstrate that many firms need to improve core elements of their approach to complaints handling.
What did the review uncover?
The FCA reviewed complaints and root cause analysis within a sample of 40 firms, including businesses of different sizes and a range of sectors.
Below is a summary of the key findings from the FCA’s review:
| Good practice | Areas for improvement |
| ✓ Management information (MI) and clear governance structures – root cause analysis of MI to identify trends and themes of complaints received, with evidence of clear escalation routes. | ✗ Analysis of granular MI regarding different customer types – outcomes for different groups of customers, such as vulnerable customers.
✗ Clear and evidenced discussion of complaints data at decision making governance fora, including actions and decisions taken.
✗ Post-intervention or change reviews of any changes made by firms – ensuring any changes made have been effective and delivered desired outcomes for customers.
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What steps do firms need to take?
1) Create a detailed and effective policy and procedure
Building on the above, providing staff with the guidance and tools required to effectively identify and handle complaints. This should be clear and simple, with a specific focus on defining what material distress and inconvenience means to your firm, what monetary loss includes, approaches to root cause analysis and governance.
It should also include a remediation framework to ensure consistently fair outcomes are achieved. Policies and procedures should reflect how you’ve assessed what the Consumer Duty means to how you handle complaints. This must involve defining:
- what prompt acknowledgment of complaints means
- how you approach keeping complainants appropriately informed throughout the handling of the complaint
- how you ensure and monitor good customer outcomes are being achieved.
This should be evidenced through a recent refresh or update on internal policies and procedures.
2) Have an adequately resourced and skilled complaints team
Define who specialises in the products, activities, and services your firm undertakes, while also adhering to the FCA’s dispute resolution rules (DISP). The complaints team should retain up-to-date knowledge of the FOS’ approach and response to complaints of a similar nature to that they have received.
When reviewing complaints, the team should act impartially and adopt the FOS’s approach of reviewing complaints based on what is fair and reasonable in the circumstances of each complaint.
You should also provide your staff with robust and tailored complaints training, catered dependant on role. This training must provide staff with the required knowledge and skills to effectively identify, handle, process, and administrate complaints.
3) Build a structured quality assurance process for complaints handling
Whilst your complaints team specialise in complaints, the products and services of your firm, and associated DISP rules, it’s important to have controls and systems in place to monitor their output.
For example, a complaints team manager, dedicated first line quality assurance team, or a second line assurance team should be monitoring whether processes are being adhered to and ultimately that the consistent and correct outcomes are being achieved for customers.
4) Ensure that internal systems and controls allow for accurate, in-depth complaints MI
Do internal complaints handling systems make it possible to collate molecular MI? Who compiles the data and what controls are in place to provide assurance that data is accurate?
Staff need to be trained to accurately administrate complaints e.g. accurate conclusion of proximate cause of complaint (primary category) and sub-categories (secondary categorisation for root cause analysis).
In-depth MI can be achieved in various ways, but examples include the creation of a dashboard which links complaints data such as:
- complaint volumes (including vulnerable customers)
- complaint outcomes
- number of complaints resolved within three days
- number of complains resolved within eight weeks
- number of complaints resolved after eight weeks
- redress paid
- complaints forwarded
- FOS complaints / outcomes
- external data (e.g. social media feedback)
- quality assurance outcomes.
All of the above should link back to the key pillars of Consumer Duty and its expected outcomes. Enhanced maturity versions of the above include data relating to expressions of dissatisfaction which were not considered to be a complaint, but from which the data could indicate areas for improvement.
5) Have a clear governance structure in place
At what sub-committees, committees, exco meetings is complaints data presented at? Is complaints data and detailed analysis presented clearly and prominently at sufficient governance fora to appropriately inform relevant management and senior management of not only complaints performance but identified trends or areas for improvement?
6) Evidence effective root cause analysis by taking steps, actions, and making decisions where issues have been identified
This can be achieved through implementation of action plans, which include clear action instructions, owners, update deadlines and closure deadlines.
Additionally, upon action completion, such action plans should document detailed verbatim of what changes or amendments have been made, including any such monitoring systems put in place and how changes or amendments have delivered positive change in delivering good customer outcomes in line with the Duty.
7) Conduct post-implementation or change reviews
Following identification of trends or issues, it’s not enough to just make changes or improvements. It’s vital to understand and document how changes and improvements made have delivered the desired results. For example, conducting post change or improvement reviews will help to inform whether improvements and changes made have had the desired impact or outcome.
8) Implement a structured complaints return process to provide accurate data to the FCA
You should have a primary Reg Data account holder and secondary Reg Data users to ensure you don’t have sole dependency on one user.
Check that the team or individual collating complaints data are appropriate, with a robust quality assurance process to gain assurance that the data compiled for returns is accurate. For example, firms should ensure that individuals collating the data can interpret or review the data to understand if it’s accurate or not, combined with a robust and documented approval and sign-off processes.
How can Bovill Newgate help you improve your governance, MI, and reporting?
Our dedicated team regularly advises firms in a wide variety of financial services sectors. This includes wealth, investments, pensions, mortgages, insurance, credit, and funeral planning sectors.
Our specialists use their industry and sectoral experience to complement their knowledge of how both the Financial Ombudsman Service and Financial Conduct Authority operate, ensuring we identify the right approach for your business.
Reach out if you’d like to discuss any of the topics mentioned above or if you require any tailored support.
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