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Conduct Risk- How Can Technology help drive cultural Change?

Conduct Risk- Boring? Just another FCA fad?

The concept of ‘conduct risk’ was first aired in 2011 in the then Financial Services Authority’s Retail Conduct Outlook. It was described there as “the risk that firm behaviour will result in poor outcomes for customers”. More recently, the 2013 FCA Retail Conduct Outlook discussed the concept at great length, outlining how the FCA would be using it as a supervisory tool.

Firms were required “to engage with the analysis and messages in this document in a range of their business strategies and decisions– from product design and distribution to funding strategies and how they use and oversee technological developments. Firms should look at their business model, strategy and structure to critically assess whether any of the drivers and forward-looking risks apply to their own business…”

There are, as usual with many FCA led initiatives, many interpretations of conduct risk.    For this we need to treat the services that a wealth manager provides as if it were a product- like the Apple iPhone.  How do companies that are selling a product create and design  a product, identify their potential customers and then sell it to them.  In addition what does the organisation do to support those customers subsequently?  The marketing aura that is related to a brand is always spoken about as a being the embodiment of the ethos and behaviour of an organisation.  Conduct Risk is that aura, how do your customers perceive you and how does your conduct measure up to that perception?

The client or customer is at  the centre of this process.  There are the following elements to the interaction with a client:

  • Voice of the Customer
  • Product Development
  • Sales 
  • Client On Boarding

How much are you looking at technology in each of these areas?  The Voice of the Customer is a standard thing in the real world, where product is made.  The customer dictates the way product development is carried out.  The product development drives the messages that form part of Sales, and the promises made during the sales process form the key part of the Client On Boarding process.  

Technology around data will drive the voice of the customer.  This is where big data techniques can produce a customer voice from the existing data- but forums, focus groups, questionaires etc are easily automated.  The use of a centralised CRM solution is the key to collating the metrics on client behaviour and product KPI's.  A lot of the focus of the FCA has been on Client On Boarding, and a whole industry has grown up around it, but while it is the confluence of client, sales and product development, it is just that, and therefore technology can also help in those areas as well.

I believe that Conduct Risk is a great catalyst for you to get a grip on the process of your business, and automate the hell out it.  There is a cycle involved here.  You need to develop product that clients will buy and will keep coming back to.  It will need to be a product that they will refer their friends to.  I have been relating this back to a product like the iphone, but the same would apply to a Star fund manager such as Neil Woodford.  He has created a product that fulfils all the criteria that we are looking for.


There are many aspects to this but I do urge you to look at Conduct Risk as an opportunity to create a central database of client data, to create communities of like-minded people and to incorporate the voice of the customer in everything you do.  You can only change what you can measure.


A Suitable Client?

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