Reconnecting consumers with lost assets

Over 28 million accounts with a combined value of £89 billion have been lost or forgotten in the UK, including £8 billion in unclaimed life insurance policies alone.

As legacy assets come into the regulator's scope for Consumer Duty in just a matter of weeks, it raises the question of what the financial services industry should be doing to better address this issue.

Dormant accounts

Many factors contribute to the dormancy of financial accounts. Life changes such as marriage, divorce, job and address changes, coupled with general inactivity or poor financial literacy, are significant contributors.

Financial services providers also share the responsibility. Outdated systems, changes in customer communication and the consolidation of services and brand changes due to mergers and acquisitions over the last two decades have created significant historical data problems, compounded by legacy technology and fragmented data.

We have seen that dormancy affects all customer demographics, but it is particularly prevalent among vulnerable groups, including the elderly, those experiencing bereavement, and those with poor financial literacy.

The impact of lost and forgotten policies shouldn't be underestimated.  Where there has been a bereavement, the uncertainty and potential financial difficulties caused by unclaimed insurance benefits can lead to significant stress and anxiety for surviving family members. In addition, executors and heirs may face difficulties in probate processes if insurance policies are not documented and claimed, leading to delays and legal complexities.

Maintaining data

Accurate and up-to-date customer data is essential for compliance with regulations and effective management of customer relationships.

Failure to maintain this data exposes firms to conduct and financial crime risks. Improving accessibility through technology can help firms stay on top of regulations, enhance the customer experience, boost satisfaction and retention, and reduce the risk of dormancy.

As we move forward, financial institutions must recognise the value of collaboration. Here are some steps the financial services sector can take to better reconnect consumers with lost assets:

1. Cultural shift: Financial institutions must foster a culture that prioritises the protection and support of vulnerable customers. This includes training staff to understand and address the specific needs of these individuals.
2. Technological integration: Firms should integrate advanced fintech solutions to streamline processes and improve data management. This will help in accurately tracking customer information and reducing dormancy.
3. Collaboration: Traditional financial firms and fintech companies should work together to leverage each other's strengths. Fintechs can offer innovative solutions and agility, while established firms provide stability and a broad customer base.
4. Regulatory compliance: Staying on top of regulatory requirements is crucial. By adopting fintech solutions, firms can ensure they meet compliance standards while also providing a better customer experience.
5. Customer engagement: Proactively engaging with customers can prevent accounts from becoming dormant. Regular communication and personalised services can help maintain active customer relationships.

The role of advisers

Financial advisers can play a pivotal role in helping consumers reconnect with their dormant accounts.

By leveraging technology, providing comprehensive education, facilitating communication, and advocating for better policies, advisers can significantly reduce the prevalence of dormant accounts and help clients reclaim potentially significant financial assets.

These efforts not only enhance clients' financial wellbeing but also strengthen the trust and value they place in their advisers.

Moving forward

The financial services sector stands at a crossroads. By improving customer engagement, updating communication strategies, leveraging modern technology and fostering a culture of proactive account management, institutions can help customers stay connected with their financial assets.

Increasing accessibility will help firms stay on top of regulation, enrich the customer experience, improve satisfaction and retention, and de-risk dormancy through an efficient digital journey for lost customers.

With the regulatory spotlight turning towards legacy products and accounts, financial product providers must become far more proactive in adopting initiatives that will accelerate customer reconnection and the release of dormant monies. Proactive measures, enhanced technology and a commitment to customer engagement are essential steps in this journey.