Consumer Duty explained
Consumer Duty rules set out a framework that means providers and adviser firms of all sizes need to measure whether they’re delivering good outcomes for their customers and clients across several areas.
These areas include the suitability of products that have been recommended, the quality and clarity of verbal and written communications, the quality of the pre-sale and post-sale service offered, and whether the support given helps customers to make financial decisions about their future. All of these areas include clients with vulnerabilities.
This greater focus on consumer outcomes means you and your firm are required to actively assess, improve and evidence how your actions and processes are working to deliver good outcomes for your clients.
The Consumer Duty is made up of a consumer principle (principle 12), cross-cutting rules and four outcomes that represent four different sets of requirements that you’re expected to meet.
What is the consumer principle?
The consumer principle (principle 12) is the requirement that: “a firm must act to deliver good outcomes for retail clients.”
This reflects the overall standard of behaviour, requiring firms to always ensure they are delivering positive results for their customers.
What are the cross-cutting rules?
The Consumer Duty sets out three cross-cutting rules that help you understand how firms should act when trying to achieve good outcomes for their clients:
- act in good faith toward retail customers
- avoid foreseeable harm to retail customers
- enable and support retail customers to pursue their financial objectives.
What are the Consumer Duty outcomes?
The Consumer Duty outcomes set out requirements that you must meet when providing your services to clients.
Documenting how these outcomes are being met is a key part of the Consumer Duty. This evidence should be made available to the FCA upon request, as they’ll use this to test whether outcomes are being achieved.
The Consumer Duty outcomes cover four distinct aspects of the relationship between firms and their clients:
- Products and Service: understand if products and services are suitable for your clients in the long term
- Price and Value: understand if the price your clients pay for a product that you’ve recommended is reasonable when compared to the benefits they’ll get from that product (including the cost of advice)
- Consumer Understanding: clients must get the information they need at the right time, in a way that they can understand
- Consumer Support: our customers and your clients must get the right level of support with products, services and their own finances when they need it most.
What does the Consumer Duty mean for you and your clients?
The FCA is acting to ensure all advisers understand their regulatory duty to protect the interests of their clients.
If you meet the requirements of all four outcomes, then all of your clients should:
- gain a better understanding of what your service offers and the products that you recommend to them
- have the information and understanding to make more informed decisions about products and their own financial future
- pay a price for your service and the products you recommend that’s reasonable, when compared to the benefits they’ll receive
- be made fully aware of any risks, charges, fees and price changes that may appear over the life of a product
- receive clear, transparent and jargon-free communications at the right time, in a way they can understand – including clients with accessibility needs
- receive a consistent level of customer support from both you and providers – including vulnerable clients.
How Royal London can support you
At Royal London we champion working with advisers to help achieve good outcomes for our customers and your clients.
We believe that any steps towards improving customer outcomes are always worth taking. We have the experience and resources to help you improve your client relationships, while we work to improve relationships with our own customers. Together, we can give your clients the level of service and support that the Consumer Duty expects.
Our guidance and resources can help you:
- document your implementation plan – a key requirement of the FCA
- identify areas of your business where changes or improvements are required
- identify which products and services may be best suited to your clients through every life stage
- understand vulnerability, how you can identify clients with vulnerabilities and support them
- demonstrate the fair value of your firm when recommending a Royal London pension or protection policy
- evidence the cost of delivering your advice service
- assess if the outcomes your clients are experiencing are in line with expectations
- meet the specific requirements of the four Consumer Duty outcomes.
Consumer Duty articles
Read our Consumer Duty articles for protection and pensions.
Consumer Duty – is it a huge protection opportunity for adviser firms?
Further FCA guidance
The FCA's guidance on Consumer Duty (opens in a new window)