Consumer Duty: What Firms Have Learned

Consumer Duty One Year On: What Firms Have Learned

The Consumer Duty came into force on 31 July 2023 for open products and a year later for closed ones. Enough time has now passed — and enough FCA review activity has followed — to see clearly what separates firms that have embedded the Duty from those still treating it as a documentation exercise. This article sets out what firms have learned, drawing on the FCA’s reviews of the first and second cycles of annual board reports.

It is written for compliance leaders, board members and finance leaders in regulated firms serving retail customers, where the Duty has reshaped what good conduct looks like.

The central lesson: writing the policy was the easy part

The single clearest theme from the FCA’s reviews is that the first implementation phase tested whether firms wrote the policies, and the phase since has tested whether they can prove customers actually receive good outcomes. Many firms did the first well and have struggled with the second. Producing a Consumer Duty framework, mapping the four outcomes and issuing fair-value assessments turned out to be more straightforward than evidencing, across a whole book of customers, that the outcomes are genuinely good.

That shift — from having a framework to proving it works — is where most of the learning has concentrated, and where the gap between strong and weak firms is now widest.

Show, don’t tell

The phrase that recurs through the FCA’s board-report findings is, in effect, show don’t tell. The regulator found firms presenting extensive data without explaining how it demonstrated good or poor outcomes — dashboards full of metrics that never reached a conclusion. The better reports went beyond assertions that the firm was meeting its obligations and set out how the firm had assured itself that it was delivering good outcomes, with the analysis to support it.

For a board report specifically, the FCA looked for evidence of genuine board challenge — not a paper the board received and noted, but one it interrogated. Plans for improvement were expected to carry timescales, named owners and an indication of the data that would show the fix had worked. Firms learned that a report full of confident language but thin on evidence of scrutiny reads, to a supervisor, as a firm that has not really tested itself.

Consumer understanding: absence of complaints proves nothing

The FCA’s review of the consumer-understanding outcome produced one of the most quoted findings: several firms relied on sales data, or the absence of complaints, as evidence that customers understood their products — and the regulator said this provides no reliable assurance whatever the firm’s size. Understanding has to be tested, not assumed from the fact that nobody complained.

The firms doing this well analyse insight from call listening, complaints, chat transcripts, website analytics and drop-off data, and test communications with real customers before and after changes. That is a materially higher bar than issuing clear-looking documents and waiting for problems, and closing the gap to it has been a significant piece of learning for many firms.

Outcomes monitoring across the whole book

A related lesson concerns coverage. The FCA has pushed firms to move past monitoring a sample toward evidencing outcomes across the whole customer base, consistently. That has real operational consequences: manual reviews and spreadsheets do not scale to full coverage, and firms have had to invest in the monitoring capability to see every relevant interaction rather than a slice. Outcomes monitoring that shows complaints, persistency, switching rates and closed-book outcomes — and draws conclusions from them — is what the regulator now expects.

Distribution chains: your responsibility does not stop at your front door

One area the FCA has repeatedly flagged as weak is distribution-chain monitoring. Firms that rely on third parties to reach customers remain responsible for outcomes along that chain, and the regulator found many firms unable to evidence outcomes beyond their own direct customer contact. With distribution-chain accountability confirmed as a live area of FCA focus, firms that manufacture or distribute through others have learned they need visibility they often did not previously have.

What the strongest firms now do differently

Pulling the learning together, the firms best placed under the Duty share a pattern: they monitor every interaction rather than a sample; they map each finding to a specific one of the four outcomes; they collect evidence close to the interaction rather than reconstructing it later; and they connect each issue to a concrete action with an owner and a timescale. In short, they treat the Duty as a continuous outcomes-assurance discipline rather than an annual reporting event.

What this means for the compliance function

The Duty has changed what a conduct compliance function has to be able to do. Rules-based monitoring — checking that procedures were followed — is no longer sufficient; the function has to evidence outcomes, which demands data capability, analytical judgement and the standing to tell the board uncomfortable things. That has raised demand for compliance leaders who can operate in an outcomes-based world, and it is one of the clearest ways the Duty has reshaped the conduct hiring market.

FD Capital recruits the compliance leaders who can build and evidence Consumer Duty outcomes monitoring, into regulated firms serving retail customers.

Fair value: still the hardest outcome

Of the four outcomes, price and value has proved the most demanding to evidence, and the FCA has kept up the pressure through sector-specific work — premium finance, pure protection, unit-linked pensions and long-term savings among them. The lesson firms have drawn is that a fair-value assessment cannot be a one-off document filed at launch; it has to be a live judgement, stress-tested across the product range and revisited as costs, take-up and outcomes change.

Firms that treated fair value as a compliance artefact rather than an ongoing commercial-and-conduct question have found themselves exposed when the regulator asked to see the working. The strongest have built fair-value into their product governance so it is reassessed as a matter of routine.

The supervisory model has changed too

Part of what firms have learned is that the FCA itself is supervising differently. The regulator has moved toward a data-led, risk-based model — using data to spot potential harm and focusing on outlier firms and products rather than reviewing everyone uniformly. That raises the value of a firm being able to show, with its own data, that it is not an outlier. A firm that monitors its outcomes well and can evidence them is far better placed under this model than one that waits to be asked.

What this means for firms preparing their next board report

The accumulated learning points to a consistent set of priorities for each successive board report: move past dashboards to analysis that draws conclusions; document the board’s challenge rather than just its receipt of the report; attach timescales and owners to every planned improvement; evidence outcomes across the whole book, not a sample; deepen the evidence on consumer understanding beyond sales data and complaint volumes; and extend monitoring into distribution chains. Firms that treat each cycle as a genuine self-examination rather than an annual submission are the ones the regulator finds convincing.

The role of the board

A recurring theme in the FCA’s findings is the board’s role, and it is a lesson many firms are still absorbing. The Duty makes the board accountable for outcomes, not just for receiving a report about them. The regulator looked for evidence of genuine challenge — boards interrogating the data, questioning management’s conclusions, and pushing back where the evidence was thin. Firms where the board simply noted the report scored poorly. The learning is that the annual board report is a board responsibility to scrutinise, not a compliance deliverable to receive, and firms that have engaged their boards properly produce visibly stronger reports.

What this has meant for resourcing

Meeting the outcomes-evidence bar has required investment many firms underestimated at the outset. Full-coverage monitoring, communication testing, fair-value stress-testing and distribution-chain oversight all demand data capability and people. Firms that resourced the Duty as a one-off implementation project, and then stood the resource down, have found the ongoing evidence burden difficult. Those that built a permanent outcomes-monitoring capability are better placed — and that shift in resourcing is one reason demand for conduct and data-literate compliance professionals has risen.

This article is general information about UK financial services regulation and recruitment practice. It is not legal or regulatory advice. Firms and individuals should take their own professional advice on their specific circumstances.