The UK financial services landscape has been undeniably reshaped over the three years
since the duty was first announced by the Financial Conduct Authority's (FCA). Far from a
mere tick-box exercise, this landmark regulation, fully in force for new and existing products
since July 2023 (and closed book products since July 2024), has challenged firms to
fundamentally re-evaluate their relationship with customers. The central tenet – acting to
deliver "good outcomes" for retail customers – sounds simple, yet its practical application
continues to evolve, creating both opportunities and ongoing challenges for firms across the
sector.
The Duty isn't just about avoiding harm; it's about proactively enabling customers to achieve
their financial objectives. This is encapsulated by the three cross-cutting rules: acting in good
faith, avoiding foreseeable harm, and enabling and supporting customers to pursue their
financial objectives. These are, in turn, supported by four outcome-based rules: Products
and Services, Price and Value, Consumer Understanding, and Consumer Support.
With the date of the full implementation now disappearing in the rear view mirror how has the
FCA's supervisory focus changed? It could be argued that they’re no longer looking at firms’
plans; instead they’re scrutinising the tangible impact on customers. Recent publications
from the regulator, including reviews of firm's approaches to consumer support and the
treatment of vulnerable customers, paint a clear picture: 'quot;good outcomes' are not a static
target.
One of the most significant areas of ongoing scrutiny is the Fair Value Outcome. The FCA
has been clear that fair value is not simply about offering the lowest price. Instead, it
demands a robust, evidence-based assessment of the relationship between the total price a
customer pays (including all fees and charges) and the benefits they receive from the
product or service. This requires firms to go beyond benchmarking and truly understand the
utility and value their products offer to different customer segments, particularly vulnerable
ones. The FCA has already intervened in areas like Guaranteed Asset Protection (GAP)
insurance, demonstrating its willingness to take action where it believes firms are not
delivering fair value. This proactive stance means firms must continually review their pricing
structures and ensure their fair value assessments are living documents, not just one-off
exercises.
Consumer Understanding is another critical pillar. It's no longer enough for firms to simply
provide information; they must ensure that customers genuinely understand it and can make
informed decisions. This extends to all communications, from initial marketing to ongoing
statements. The FCA expects firms to tailor communications to different customer
characteristics, including vulnerabilities, and to test their effectiveness. This demands a shift
from generic, jargon-laden disclosures to clear, concise, and accessible language. Firms are
increasingly using behavioural science insights and user testing to ensure their
communications truly land with customers, rather than just fulfilling a disclosure requirement.
The Consumer Support Outcome has also seen considerable attention. The FCA expects
firms to provide support that meets customers' needs throughout the entire product lifecycle,
from initial enquiry to complaint resolution. This includes ensuring easy accessibility,
avoiding unreasonable barriers (e.g., to switching or exiting products), and providing
proactive assistance, especially for vulnerable customers. The regulator’s reviews have
highlighted both good practice – such as comprehensive training for frontline staff and clear
signposting to help – and areas for improvement, like inconsistent post-sale support and a
reliance on reactive measures rather than proactive engagement.
The overarching theme from the FCA is that the Consumer Duty is a continuous journey, not
a destination. Firms are expected to embed the Duty into their culture, governance, and day-
to-day operations. This means senior management and boards must demonstrate clear
ownership and accountability for delivering good outcomes. Management information (MI) is
crucial, but it needs to be more than just raw data; it must provide genuine insights into
customer experiences and drive actionable improvements.
The implementation of the Duty for closed book products in July 2024 marked another
significant milestone. While these products are no longer actively marketed or distributed,
firms still have an ongoing responsibility to ensure they continue to deliver good outcomes
for existing customers. This has presented unique challenges, particularly in accessing
historical data and making adjustments to legacy systems and products.
In conclusion, the Consumer Duty represents a profound shift in the regulatory paradigm,
moving from a prescriptive rules-based approach to an outcomes-focused one. While the
initial scramble to meet deadlines has passed, the true work of embedding the Duty and
continuously demonstrating 'good outcomes' should be the focus of all firms in financial
services. Firms that embrace this cultural transformation, prioritising genuine customer-
centricity and proactive risk management, will not only meet regulatory expectations but also
build stronger, more trusted relationships with their customers in the long run. The FCA will
undoubtedly continue to supervise assertively, ensuring that the promise of the Consumer
Duty translates into tangible benefits for every retail customer across the UK financial
services sector.
The author, Vince Harvey, has worked in financial services for many years and has been running his
compliance consultancy for more than a decade. His specialist areas within the Compliance Alliance
are investment advice and management.
You can contact him on 07890311875 or at vince@compliancecubed.co.uk