Consumer Duty and Retail Conduct

Consumer Duty sets standards of consumer protection across financial services and requires firms to put their customers’ needs first. It raises expectations of firms operating in the retail market on how they engage with their customers.

The FCA’s Consumer Principle (Principle 12) requires firms to “act to deliver good outcomes to retail customers”. Firms also have to consider the value their products provide to customers and act to prevent foreseeable harm.

All firms must review their products and services in line with the expectations of the Duty. This raises the bar on product management, sales and servicing arrangements and makes management accountable for ensuring the Duty is a part of the firm’s organisational strategy and governance.

The Four Outcomes

The duty outlines four outcomes that firms mush achieve for retail customers (including small businesses and small charities):

Products and Services

Products must be fit for purpose.
Design must match target customer needs.
Selling to the wrong audience is forbidden.

Price and Value

Prices must represent fair value.
Benefits must justify the total costs.
Hidden fees are banned.

Consumer Understanding

Communications must be clear and fair.
Marketing must avoid confusing jargon.
Customers must get information when needed.

Consumer Support

Support must meet customer needs.
Cancelling must be as easy as buying.
Post-sale hurdles must be removed.

Cross Cutting Rules

The outcomes are supported by the cross-cutting rules. These rules define how firms must behave to achieve the four outcomes.

Act in Good Faith

Honest Conduct: Firms must be open, fair, and honest in all dealings with retail customers.
No Exploitation: Taking unfair advantage of a customer’s lack of knowledge, inertia, or vulnerability is strictly prohibited.
Consistent Standards: This ethos must be deeply embedded throughout the entire culture of the firm, from front-line staff to the board.

Avoid Foreseeable Harm

Proactive Protection: Firms must actively identify and mitigate risks that could cause financial or non-financial harm to customers.
Dynamic Review: Outdated practices, unclear terms, or poor product features must be changed before they cause negative impacts.
No Ignorance: Firms cannot claim they did not know about a risk if it could have been reasonably predicted or spotted through data analysis.

Enable Customers to Pursue Financial Objectives

Empowered Decisions: Firms must give customers the right information and support to make choices that align with their own goals.
No Choice Architecture Traps: Using “sludge practices” or digital tricks to nudge customers into expensive choices or prevent them from switching is banned.
Autonomy Support: The firm’s role is to remove barriers so the consumer can freely act in their own best interests.

Our Approach

We work with all firms operating in the retail markets, including banks, asset managers, private banks, insurers, brokers and payment services firms. We tailor our approach to the firm, its customers and services. Our solutions reflect the scale of the business, the regulatory, operational and reputational risks it faces and potential harm to its customers.

Our team has worked in front and back office roles at financial services institutions, in compliance and risk leadership roles, within the UK regulators, and as regulatory consultants. We blend this practical experience with the relevant technical skills to deliver sustainable solutions.

Our team has wide-ranging experience in the development and integration of ‘outcomes based’ regulatory frameworks and associated governance. We combine this with our consulting expertise to deliver sustainable solutions.

Our Solutions

We work with both first and second lines of defence to embed Duty requirements into their systems and controls and align Duty with the firm’s risk and compliance frameworks.

We offer a range of services to help firms implement and embed Consumer Duty including:

Overall Consumer Duty Assessment

Helping firms evaluate whether their arrangements cover all of the Duty requirements. Assessment of the adequacy of the MI collected to evidence Duty compliance. Evidence that the firm acts on evidence collected in MI to ensure good customer outcomes.

Product Governance

Reviewing and making recommendations on product governance, distribution and servicing.

Product Reviews

Looking end-to-end or at individual components of a product, its governance, and related MI. We can assess how the product is designed, developed, marketed, distributed and serviced to meet Duty expectations.

Systems and Controls

Supporting firms to ensure their control environments are effective when implementing and integrating Duty expectations.

MI and Data Evaluation

Ensuring firms have appropriate data to measure ‘good outcomes’ and ‘prevent foreseeable harm’.

Integration into the wider Governance framework

Ensuring end-to-end governance frameworks consider the Duty and senior managers discharge their responsibilities.

Training for Staff and Senior Managers

Providing training to staff and management on the Duty and the implications. Supporting management to ensure that they are discharging their responsibilities in line with Senior Manager (SM&CR) requirements.