Thinking Beyond the FCA’s new Consumer Duty

29 October 2021
The FCA’s proposals on a new Consumer Duty come after several years of debate and deliberation. It stops short of imposing a fiduciary duty on financial services firms, but certainly raises expectations in how we should think about customers.

It proposes that we need to look beyond just the fairness of how we serve them, and step into their shoes and understand better what their outcomes look like from their perspective.

It asks us to consider whether we would be happy if it was our family members buying our products and paying for our services. In essence, it raises the bar from ‘treating customers fairly’ to ‘treating customers well.’ That is a subtle, but significant, distinction.

And it deepens our definition of customer outcomes with guidance and rules that cover a range of elements: communications, products & services, service, and price & value.

While it does raise some challenges for the industry and there are certainly points of detail we will want to debate, it’s difficult to argue against a principle that is intuitively right. And one which could help us transition to a sector that is more widely trusted by customers. Customers who rely on our help to improve their financial resilience to face the many challenges life poses.

Embrace the new Consumer Duty

In short, we should embrace the new Consumer Duty; think of it less as a challenge and more as an opportunity.

But our pursuit of improving customer outcomes could be extended even further.

The argument for responsible investment and, particularly, the fight against climate change has never been stronger. A huge amount of work has been done to embed net zero carbon commitments and there is a step change in the work now underway to deliver on all of those.

Since the early days of Environmental, Social and Governance (ESG), the Paris Agreement and the Sustainable Development Goals developed by the United Nations, through to more recent initiatives on disclosure and reporting through TCFD, the rise of responsible investing seems inexorable. Rightly so.

The hosting of COP26 in Glasgow this year serves as punctuation for the UK’s involvement, and will likely bring another round of high-level commitments from nations all around the world.

And of course, all of these commitments will require significant investment, the natural source for which will be the long-term investments used to fund pension saving. While there are a number of challenges to this, it’s not a leap to see how these things could marry up.

What we perhaps haven’t done is consider what that really means for customer outcomes.

Put simply, if I saved all my life in a suitable pension product with good service, good returns and some timely guidance and advice then I may on the face of it have a very good retirement outcome; a decent pension pot and plenty of options to fund my later years.

But if my house floods every year due to ever deteriorating weather conditions, or the city I live in is so polluted I can’t venture outside, then it won’t be a great outcome at all.

Given that people’s savings can be invested in ways that will help avert those problems, we must consider our responsibility not just to the product we offer but our contribution to the environment people will live in when they reach retirement.

In summary, we should extend the definition of good customer outcomes to include both elements: the product and the environment. Only then will we have a more complete picture of our duty to consumers, and a chance to truly improve their overall standard of living in retirement.

For a broader view of how we help improve customers’ standard of living in retirement visit

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The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The firm is on the Financial Services Register, registration number 117672. It provides life assurance and pensions. Registered in England and Wales number 99064. Registered office: 55 Gracechurch Street, London, EC3V 0RL.