A Consumer Duty recap: frequent obstacles to achieving good customer outcomes

What happened?

TCC’s regulatory experts have taken stock of the frequent questions and obstacles that firms face in meeting the Consumer Duty, working through each of the four outcomes: consumer understanding, consumer support, products and services, and price and value.

On consumer understanding, common obstacles include customers relying on information or media rather than firm communications, documentation issued to protect the firm rather than the customer, and products recommended without customers being made aware of the risks involved.

Why does it matter?

Consumers can only be expected to take responsibility for their financial decisions when firms communicate effectively and ensure a clear understanding of products, including their features, risks and the consequences of decisions made. Where this does not happen, firms fall short of the Duty’s requirements even if governance structures look complete on paper.

On consumer support, recurring problems include vulnerability being identified but not reflected in client-facing documentation, reliance on customers to identify themselves as vulnerable, and barriers in the customer journey that prevent customers receiving the support they need.

Who is affected?

These obstacles are relevant across wealth management and financial advice, pensions and retirement income, payments and fintech, banking, consumer credit and lending, general insurance and protection, and motor finance.

Key risks

• Inadequate research into a product or service’s target market
• Fair value assessments completed with limited resulting changes to pricing, relying mainly on market benchmarking
• Actual charges differing from those quoted in customer agreements
• Charging for services the firm is not actually providing, such as ongoing advice
• Difficulties for customers wanting to switch or exit a product or service

Actions to take

1. Validate how you know customers understand your products, advice or service
2. Assess whether post-sale support is at least as effective as pre-sale support
3. Review how target markets are defined and documented for each product
4. Check whether your charging structure is regularly reviewed against the value delivered
5. Ensure board reports address ongoing work and necessary actions, not only positive outcomes

Wider implications

Firms should expect that the regulator can request the outcomes of monitoring activities and board reports at any time, and that this information will be used to assess compliance with the Duty and identify detrimental practices.

Boards are expected to take necessary action, however uncomfortable, and to demonstrate this individually and collectively, including revisiting or questioning existing analysis where needed. Chairs are responsible for ensuring information is reviewed in a timely way with appropriate quorum and management information.

Recommendations

TCC’s subject matter experts can assess a firm’s Consumer Duty strategy, identifying compliance gaps and highlighting areas that require focus, whether additional expertise is needed to implement changes or independent assurance is sought that Consumer Duty integration is comprehensive. Technology can also support ongoing monitoring, review and documentation of outcomes.