The FCA is targeting culture and conduct changes across the financial services industry by setting an expectation that a firm's approach to deliver good outcomes is embedded throughout the entire customer journey.

Explore our insights and what this might mean for your firm.

Key Requirements

The Duty is a package of measures, rather than a single duty. Crucially, it introduced a new Consumer Principle that requires firms to act to deliver good outcomes for retail clients.

The Consumer Principle is underpinned by a set of four cross-cutting rules that explain how firms should act to deliver good outcomes for customers:

1. Governance of products and services
2. Price and value
3. Consumer understanding
4. Consumer support

Scope

The Duty applies to UK-authorised firms undertaking activities in the UK that ultimately have a material impact on retail clients.

It captures firms that provide services to retail clients, even where those firms do not have a direct relationship with the retail client as the duty applies where a firm has ‘a material influence over, or determine[s], retail customer outcomes.’

It covers both new and existing products. 

Consumer Duty One Year In  

The FCA published a number of speeches, and thematic reviews following the implementation of the duty including a Consumer Duty: 1 year on webinar on 31 July 2024.

There are some clear focus areas for firms and key takeaways:

• Impact of the Consumer Duty: The Consumer Duty has driven significant positive changes in firm culture, conduct, and governance. Firms have developed new data and metrics to better understand their customers, improved the way they capture and record information about customer vulnerabilities, and changed their employee remuneration structures to align with good customer outcomes.
• Fair Value Assessments: These need to consider the total price paid relative to the benefits received over the product's lifetime and should include benchmarking, using solid data and credible evidence, and considering customer cohorts based on target market.
• Outcomes Monitoring: A mix of qualitative and quantitative data is required to spot trends and emerging issues.
• Customer Understanding and Support: Communications need to be clear and likely to be understood by customers. This includes revisiting how products are described to customers and providing timely and clear information.
• Complaint Handling: Good complaint handling can repair relationships and build trust. Complaints data provides insights to proactively address issues, and demonstrate progress in embedding the Consumer Duty at every level of the organisation.
• Innovation and Flexibility: The Consumer Duty allows space for firms to innovate and find new ways of serving their customers.

These takeaways highlight the importance of a customer-centric approach, continuous improvement, and proactive engagement with regulatory guidance to ensure compliance and deliver good customer outcomes.

Article by PIMFA featuring Linda Gibson: Consumer Duty: One Year In, What lies ahead?
 

Linda Gibson, Head of Regulatory Change (October 2024)

Not surprisingly, of the four outcomes, price and value is proving the trickiest for firms to demonstrate they are getting right and taking an appropriate and proportionate approach to the price and value outcome. The FCA recognises this and has provided a Good and Poor Practice update to help firms improve how they think about fair value assessments.  

While evolution, adaptation and a cultural shift all require behavioural change to how firms have implemented the Consumer Duty, a more physical step change is also required in how firms use data. The FCA has reiterated its desire to become a data-led regulator, using management information and additional sources of insight to drive its outcome-focused approach to regulation change. Firms now have 12 months plus of data to collate to evidence their approach to the Consumer Duty and these insights can also help unlock internal efficiencies and generate a better understanding of how their organisation operates to produce good outcomes for their clients.

Further information

The FCA made clear its expectations of firms under the new regime and produced many helpful publications and webcasts to guide firms.