Complaints should be one of the key areas of concern for wealth and advice firms every year, says Dom House, Lead Consultant at Simplify Consulting.
But unfortunately, they are not prioritised – leaving clients unsettled and likely to change provider to settle their grievances.
Our research found that nearly 1-in-5 (19 per cent) consumers said that they had moved wealth providers because of complaints of firms.
2024 was a year when tackling complaints should have been an easy win for firms to deal with the Consumer Duty – but unfortunately complaints are on the rise. We don’t expect 2025 to get any easier.
The rise in the number of complaints reaching the FOS indicates that firms are still failing to provide responses to complaints that meet the expectations of customers. We know that overall complaints can fluctuate year on year, but the long-term trend indicates that complaints are rising. Wealth Management in particular continues to battle legacy systems, and poor service levels which do not meet the needs of modern consumers.
Consumer Duty
One of the big areas of focus in 2025 will be how much Consumer Duty will have a greater impact as the effects of change start to embed and emerge.
If the changes made throughout the industry under Consumer Duty are going to start playing through in the complaints data, then really, we would expect this to come in 2025. If it doesn’t, then it probably indicates that the implementation hasn’t been effective or gone far enough.
Consumer Duty should be transformational in the way that firms view their working practices, governance and data.
If this isn’t the case, and firms are just collecting more data, without taking the necessary steps to make their products and services better, then it won’t deliver on its original intention.
FCA crackdown
We have seen the Financial Conduct Authority (FCA) become more proactive in enforcing Consumer Duty throughout 2024, with a number of Dear CEO letters highlighting areas that they believe need to be addressed. This has mainly been focussed on fees and charges, such as ‘double-dipping’ on cash holdings, or in the investigation into Ongoing Advice.
These areas may have an impact on complaints into 2025, however, we find that the majority of complaints are issues to do with customer service.
Whether the FCA will become more active in this area remains to be seen, often it is far harder to reach hard and fast conclusions about good and bad practice in this area.
We do now that certain areas, in particular Transfers is an area of frustration for the FCA, and we might expect targeted action on those providers who are consistently out of step with the market in terms of performance.
Further regulatory issues
In 2025, it is possible that we’re entering another round of large-scale remediation, which may be the consequences of Consumer Duty.
We don’t yet know the extent of the Ongoing Advice review and what the outcomes may be, however, we know that there are potentially areas where customers didn’t receive the service they were paying for. Add to that the potential for a lack of processes and controls, and gaps in the data and its clear there is the potential for it to have a large impact on certain firms.
These kinds of issues are an interesting test for Consumer Duty and whether retrospective application is, despite what was originally said, going to be become the norm for the next few years. If this is the case, then there may be other areas yet to come to light which will also require remediation.
Simple steps for firms on complaints
Next year, wealth and advice firms should take on board a few tips on how to handle complaints.
We find that a number of firms are not doing enough to resolve complaints at the first point of contact with the customer, meaning that customers then have to wait weeks for a full investigation to take place, which increases costs and resource requirements on the firm.
Firms should be more confident in recognising where they have made a mistake as early as possible, own that mistake and resolve the complaint for the customer quickly. Obviously some complaints need more investigation, but not all.
Firms also need to be far more proactive with Root Cause Analysis (RCA) and getting that information back into the business to resolve issues early.
We find RCA is back-ended within the process, meaning the reason for the complaint isn’t recorded for weeks after the complaint was made. In the meantime, more complaints are being received which could have been prevented if the RCA was recorded upfront and the business took ownership to correct the issue as early as possible.
Many firms are resourcing complaints to deal with them once they are received, but there is insufficient resource and emphasis in ‘switching the tap off’ so that less complaints are received in the first place.
By Dom House, Lead Consultant at Simplify Consulting
