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The sector will not be ready for Consumer Duty ...

Regulated firms will not be ready for Consumer Duty by the July implementation deadline, but will be almost compliant by that time.

Presenting at Mortgage Solutions’ Later Life Lending Event last week, Tony Crane, founder of Crane Consulting, said being compliant with Consumer Duty was not a “once and done” job, adding: “I don’t think we’ll be ready for duty by July. We’ll probably be sort of compliant.”

He said a lot of collaboration would be needed “before we actually get to the optimised version.”

Consumer messaging

Crane said firms needed to evidence that a product or service matched the needs of the target audience. He said lenders needed to be clear about who their target market is and amend their messaging to fit that.

Crane added: “At the moment, if we’re honest, the benefits of the equity release product are quite broad, irrespective of needs. “If that’s costed into the product, you have to evidence why that’s the case. And also, if [it] is an equity release sale, you sufficiently evidenced and discounted the other products which also meet the needs of the target market.”

He said broader messaging would make it “more challenging” for advisers and distributors to justify why they operate on a single product basis. Crane said if advisers wanted to continue solely doing equity release, their marketing messaging risked causing foreseeable harm to the consumer.

He added: “If you change that messaging to be a bit more specific so now it says on the bottom, ‘same principle but if you can’t afford payments’… you’re now pointing towards a particular type of outcome from a product perspective.”

Crane continued: “Products, communication and customer support are the three areas we’ll be expected to report on throughout the term of the mortgage. The more severe the vulnerability, the greater the monitoring responsibility you’re going to have and therefore… that will add a cost.”

Vulnerability is the foundation of Consumer Duty

In a separate presentation, Jonathan Barrett, CEO and co-founder of Comentis, said the number of vulnerabilities present in people increased dramatically when looking at the later life demographic, but there were still various nuances.

Barrett said vulnerabilities were “incredibly subjective” in their nature because there was no hard data available and this led to different interpretations. Barrett added: “It’s incredibly inconsistent across advisers. You can hold a training session with 20 advisers in the room, give them the exact same case studies and you’ll guarantee they will come up with around 50 different scenarios.

“Not saying who’s right or who’s wrong, but you just have that inconsistency. So, reporting on that, how do you know this is accurate?”

He said as well as vulnerabilities being hard to spot and a lack of data, there were challenges, as people with vulnerabilities tended to want to stay under the radar, use coping mechanisms or reject being described as vulnerable. Barrett said this was hard enough spotting with relatives, so even more difficult in a transactional relationship with a client. He said it was an “unfair request” on advisers to identify cognitive vulnerabilities during relatively short interactions without external support.

Richard Farr, CEO of Telos Solutions, said the foundation of Consumer Duty was vulnerability.

He said: “Don’t build your outcomes model and your implementation and then try to [insert] vulnerability into it. You’ve got to [put] your vulnerability checks as the foundation.”

Farr also said a vulnerable circumstance did not necessarily make a person vulnerable.

He added: “You have to record and get the records of the actual vulnerability, not their circumstances. Then analyse those and ask are the outcomes of your vulnerable customers as good as the main body of your customers?

“This is where you have to compare the outcomes of your vulnerable customer group with your standard customer group.”


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