Consumer Duty: What are the next steps?

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By Matti Pekkola, 27 November 2023

FCA regulated firms must keep up their efforts on Consumer Duty, now that the rules are fully in force.

Implementation so far

A little over a year ago, during the latter half of 2022, many firms regulated by the UK Financial Conduct Authority (FCA) were rushing to complete their Consumer Duty implementation plans for approval by their governing bodies before the FCA’s deadline. Just some months earlier, in July 2022, the FCA published its final rules for a new Consumer Duty (‘the Duty’) which set higher and clearer standards for consumer protection in the UK financial services sector.[1]  

Given the very short timelines to implement fully the Duty rules to firms’ systems and controls infrastructure, plus coming immediately after other big regulatory changes such as the UK Investment Firm Prudential Regime (IFPR), it is no surprise that the Duty implementation has proved to be a complex challenge.

The scope of the new Duty is very broad. Its requirements capture any FCA regulated firm which can ‘influence the outcomes’ for retail clients who are users of financial services and products. The level of application of the new rules therefore depends on the extent that a firm’s services or products are used by retail clients, either through direct interaction with the regulated firm, or, indirectly via third parties. Some wholesale firms without FCA permission to provide products or services to retail clients, but that are a manufacturer with retail clients as end users, discovered that they too were in scope of the Duty, although potentially in a more limited way.

Product manufacturers, such as fund managers, were put under pressure to conduct their product value assessments by the end of April 2023. This deadline had been set to allow the product distributors to conduct their own fair value assessments by the time the Duty entered into force three months later. Different industry working groups were created to enable firms to find a common set of industry standards, such as the modified version of the European MiFID Template (EMT) to meet the UK Consumer Duty disclosure requirements. 

The Duty has now been in force since the end of July 2023, but much implementation and remedial work is still ongoing. Below are a few key trends we have identified through our experience over the past year of working with many different types of FCA regulated businesses on Consumer Duty compliance.

Fair value assessments and remedial work

Regulated product manufacturers and distributors should have now completed their first fair value assessments as part of their Duty requirements. During the upcoming year, these firms must repeat the same review process again for any open products and complete their first assessments of any in-scope closed products which were previously exempt from the review requirements.

In 2024, product manufacturers are expected to collect information from their distributors. This data – which includes core data such as sales numbers, redemptions and complaints – should be then used by the product manufacturers as part of their product review process. By now it is clear that the different financial services sectors are moving towards standardised and automated information sharing models, whereby outsourced service providers request and collate data from distributors on behalf of multiple FCA regulated firms.

More importantly, where as part of their fair value assessments firms have identified existing issues with their products or services, the expectation is that those firms are working to address these issues prior to the next required review in 2024. The obvious danger is that, if a firm has a repeat issue or potential consumer harm in their 2024 Consumer Duty assessments, it could become difficult for that firm to justify why the product or service still provides good value, given nothing has been done to address the issues identified. 

To ensure that firms are completing any required remedial work following their 2023 Consumer Duty assessments, it is important that any issues with products and services are clearly identified in the management information (MI), which is provided to the firm’s governing body for oversight. Firms in scope should allocate responsibility for each remedial action to a senior manager, thus ensuring there is an individual ultimately responsible for making sure the remedial work has been completed.

Firms should also consider subjecting their internal value assessment results to independent challenge by an outside, third party, subject-matter expert. This has the potential to address any conflicts of interest.

When it comes to comparing the performance and costs of the firm’s products and services to peer groups and benchmarks, it is important that these remain consistent year on year. Compliance teams should ensure that a firm’s business units are not succumbing to the temptation to change the previously agreed comparators just because it makes the firm’s products or services look better. 

By being consistent, firms can ensure that they have useful data which will allow meaningful long-term comparisons. This also helps firms to defend their Consumer Duty assessment if they are ever challenged by the regulator.

Management information

Following internal Consumer Duty reviews of a firm’s products and services, it is vital that the results are clearly presented to the governing bodies. Good quality MI will allow the board of a firm to make informed decisions regarding the quality of its products and services, and thus, compliance with the firm’s obligations under the Duty.

By July 2024, governing bodies of FCA regulated firms must have assessed a report regarding good consumer outcomes and their compliance with any arising Consumer Duty requirements.


At the governing body level, non-executive independent directors and the firm’s Consumer Duty champion serve an important role where they can challenge the value assessment results prepared by the firm. Compliance teams should ensure that all the directors, and the Consumer Duty champion, have been provided with enough training on the topic of Consumer Duty and the firm’s obligations thereunder to enable them to provide effective challenge when needed.

Lastly, a firm’s compliance team needs to ensure that the Consumer Duty matters are regularly addressed at the governing body level, and that this is clearly recorded in the board minutes. We are starting to see more Duty agenda items for FCA investment firm clients. Earlier this year, the FCA noted that at some firms, Consumer Duty implementation plans did not receive enough scrutiny or challenge by the members of the board.[2

Testing marketing communications

Under the Consumer Understanding Outcome, the FCA wants firms’ ‘communications to support and enable consumers to make informed decisions about financial products and services.’ 

This is a Duty requirement under which the firms with no direct retail client relationships are likely to have the highest risk of causing consumer harm. 

A wholesale fund manufacturer who creates funds that can be sold to retail investors must produce key information documents (KIDs) for potential retail investors. Depending on the fund investment strategy, the risk warnings and ratings on the KID can be confusing. Larger firms tend to have the internal resources to conduct focus group testing of their financial promotions and websites to check their communications. Smaller firms are less likely to have such resources available when they review their communications. This is where the guidance for checking retail communications from the regulator and industry groups would be very helpful. At the time of writing this article, we are still waiting for the FCA and Investment Association to publish their updated guidance for checking retail communications.

Continued priority

It is clear from our work over the past 18 months that the Duty continues to be a key focus for the FCA. Firms applying for FCA authorisation, or a variation to their existing permissions, are asked regularly by the FCA to explain how their new proposed regulated activities are compliant with the Duty requirements. Existing FCA regulated firms – some of which previously had very minimal interactions with the regulator – have now been approached by the FCA to check on how the firm has applied the Duty requirements to their services and products. 

In November 2023, the FCA sent a ‘Dear CEO’ letter to wealth management and stockbroking firms, highlighting their obligations under the Duty, and potential consumer harms the FCA had detected arising from these firms. In a speech delivered in early November, the FCA’s Nisha Arora, Director of Cross Cutting Policy and Strategy, stated that Duty, ‘is not a once and done exercise’.[3] The speech made it very clear that the FCA considers the Duty implementation to be only the beginning of an ongoing process, through which new standards become embedded in the UK financial services sector. This is a departure from some other past regulatory implementation projects which, once implemented, required less ongoing engagement from the compliance professionals working at firms.

Above, we have listed some of the challenges which FCA regulated firms need to be aware of as they continue to hone their Duty compliance infrastructure. 

However, it does appear that the FCA will face a challenge of its own in trying to align the Duty requirements with other new UK regulatory developments; most notably, the initiative from the UK Treasury to review existing UK regulations which were derived from EU legislation. One such example is the potential removal of the MiFID 2 requirement to unbundle investment research from trade execution services. Such a ‘re-bundling’ exercise could hide costs from the retail investors, as the cost of research once again becomes integrated into execution fees in the absence of clearly budgeted research payment accounts. 

How the FCA will balance the upcoming UK regulatory reforms with its own Consumer Duty principles remains to be seen as we move to the next stage of the Duty’s implementation process. 


Matti Pekkola is Principal Consultant at investor services group IQ-EQ.