Three years after its introduction, the FCA’s Consumer Duty is now embedded in retail financial services. Its central principle is simple but important – firms should be able to demonstrate good outcomes, not merely compliance with a process.
The FCA’s proposed changes to the scope and proportionality of the Duty should also be welcome, allowing firms to focus their time and evidence on the areas where they can genuinely influence customers’ experiences. More proportionate information gathering and board reporting can reduce duplication and help leaders concentrate on the evidence that matters. But simplification must sharpen the Duty’s impact, not lower expectations or allow firms to step away from responsibility.
That balance matters particularly across distribution chains. Consumers experience a product or service as a single journey, even when several organisations design, distribute or support it. So, there need to be clear rules identifying the primary manufacturer and when other firms exercise material influence. Such a hierarchy is more likely to create accountability than a loosely defined model of co-manufacturers and all firms would probably benefit from sector-specific case studies showing when they may reasonably rely on one another and where responsibility remains shared.
Of particular concern are consumers in vulnerable circumstances, who will be a crucial test of any more proportionate framework. Responsibility cannot sit only with the customer-facing firm. Product design, distribution choices, communications and support all affect whether foreseeable harm is prevented. The FCA has recognised that responsibilities differ according to each firm’s role, but firms need more practical guidance on things like information sharing across the chain. They should also be able to draw on credible specialist research where it provides richer evidence than service data alone, for example, in understanding economic abuse.
Governance should follow the same outcome-focused approach. Board reporting is beneficial where it reflects a firm’s circumstances and actual influence, and can lead to meaningful challenge rather than weaker senior accountability. As a result, Boards need a coherent view of customer outcomes, culture and the quality of evidence, not simply larger compliance packs. Alongside complaints, value assessments and service metrics, firms and the regulator should continue to develop measures of trust, confidence and behaviour.
There is also an opportunity to create greater coherence between the Duty and adjacent rules. The Consumer Duty’s more nuanced combination of product design, fair value, consumer understanding and support is better suited to assessing outcomes across different customer groups. Over time, definitions and expectations across the Handbook should be aligned so that firms are encouraged to undertake more useful analysis.
All in all, the FCA’s direction is broadly right. Bringing provisions together, clarifying reasonable reliance and matching obligations to material influence should make the Duty easier to apply. A sufficiently long transition for existing products will also help avoid disruption. But success should not be measured by whether firms produce fewer documents. It should be measured by whether responsibilities are clearer, foreseeable harm is identified earlier and senior leaders can see more clearly where customer outcomes need to improve. Proportionality should support disciplined judgement and stronger professionalism. If the reforms achieve that, backed by practical and sector-specific guidance, they will preserve the Duty’s ambition while making its application more focused, credible and effective.
