Firms' communications are fundamental to helping consumers make informed decisions. We want to signal our appetite to explore opportunities and initiate change in how firms communicate key information to consumers.
Foreword by Christopher Woolard, director of strategy and competition
Like many other regulators, we have relied heavily on information to help ensure greater consumer protection and make competition work. In some cases we specify the type of information firms should disclose to customers and the format it should take. We will continue to do this where we feel it is necessary to improve outcomes for consumers.
We recognise, however, that information itself does not necessarily empower the consumer. Our work on behavioural economics has clearly shown it can overwhelm, confuse, distract or even deter people from making effective choices if presented in a way people struggle to engage with. We can begin to understand why consumers often fail to make good decisions about financial products and services, when we take into account that:
- behavioural biases, low levels of financial literacy and the complexity of some financial services and products can limit people’s ability to take appropriate action
- firms tend to use financial and legal jargon, which can make the materials they produce lengthy and impenetrable for the consumer
- in some firms, marketing material is much more consumer focused than other consumer communications
Communications play a fundamental role in helping consumers to make informed decisions. Effective, engaging information can be a key tool in promoting effective competition to supply products and services that consumers want. Greater transparency in firms’ communications with consumers can also lead to greater efficiency for the industry, with less time spent handling complaints.
Effective, engaging information is also already integral to our regulatory approach: we require firms to have due regard to the information needs of their customers, and to communicate information in a way that is clear, fair and not misleading. While some firms may feel they already do this, from what we have seen in our research, thematic reviews and market studies, it is evident most firms need to do more to communicate with consumers in a way that truly empowers them to make effective decisions.
We expect all firms to embed an organisation-wide culture where the importance of communicating effectively with consumers is recognised and prioritised. The information needs of potential customers need to be fully considered when developing a product or service and throughout the lifecycle of that product or service.
We are committed to driving improvements in the effectiveness of the information consumers receive about the financial products and services they have or want to buy. This discussion paper (DP) is intended to kick start a debate around how the FCA, industry, consumer groups and other stakeholders can work together to deliver information to consumers in smarter and more effective ways, including adopting innovative techniques as we move away from the paper-based mindset.