Emma RadmoreThe FCA has published some practical examples of good and poor practice to help firms in making judgements when designing consumer segments in targeted support models. It stresses that the guidance is not a template, nor is is an exhaustive list of what firms should consider, as firms can comply with its requirements in many different ways.
It has, however, agreed with the FOS that the FOs will consider the publication if considering what is fair and reasonable if it is referred a complaint about targeted support.
The guidance looks at:
- how firms should define “common characteristics”, both including and excluding characteristics as appropriate, and considering what might make suggestions suitable or unsuitable. Firms also need to balance a sufficient degree of granularity in the definition, but not to the extent that could reasonably be thought to be a comprehensive considering of a consumer’s characteristics or circumstances;
- considering data held for a customer: the FCA requires that firms do not ignore information they hold about a customer that might indicate a suggestion may not be suitable. Again, there is a tension between the fact that firms do not need to carry out a suitability assessment or a comprehensive consideration of a consumer’s characteristics or circumstances against the fact it may hold information which should make it clear a particular ready-made suggestion may not be suitable. It suggests a 3-step approach of
- considering what is readily accessible;
- considering whether the common characteristics capture the wider data points; and
- highlighting a data point that has not been considered – this is relevant to the requirement to clearly disclose the nature and limitations of targeted support; and
- using reasonable assumptions – which are referable to evidence, and justify the assumptions on the basis of shared needs of an individual who aligns with the common characteristics of the segment.