Context
The FCA has published a review of how firms are designing products and services to better meet customer needs. The report highlights positive steps firms have taken to improve how they design, monitor and distribute products and services under the Consumer Duty to deliver good outcomes. It also highlights extra insight and examples for smaller firms to help them apply the Consumer Duty in a proportionate and practical way. The FCA has also updated existing good practice reviews on consumer support, complaints and root cause analysis and the price and value outcome with additional insight and examples, and what appears to be updated commentary for smaller firms.
Key points to note and next actions
- The report comments on the cost of poorly designed products, on the fact that progress has been made but there is more to do, on product and service design and target markets, on monitoring and review, on distribution and third-party oversight, and on the FCA supporting firms to deliver better outcomes.
- The FCA focused on the overarching requirements of the Duty for the products and services outcome across product and service design and target market, testing, monitoring and review over the life cycle of a product or service, distribution and third parties, and customers in vulnerable circumstances.
- Good practice and areas for improvement are outlined under each of the main headings in the report.
- For smaller firms:
- The review acknowledges that smaller firms may have fewer resources and may therefore apply the Duty in a way that fits their size and customer base. To support them in doing so, the FCA included examples of good practice from smaller firms.
- In relation to adapting products or services and customer journeys for different customer segments, the FCA gives examples of some smaller firms recording customer data and making good use of it to understand the needs, characteristics and objectives of their target market.
- In relation to outcomes-focused, customer-centric MI, some smaller firms effectively collate a range of data to understand outcomes.
- In relation to monitoring, and limitations in monitoring, the FCA saw a smaller firm appearing to rely almost entirely on complaint volumes as an indicator of customer outcomes. While complaints data can be a valuable source of insight, firms should develop MI that goes beyond complaints data to gain better insight and assurance on customer outcomes. Firms should use their judgement to identify relevant sources of data to give them the insights they need to assess whether they are delivering good outcomes.
- In relation to structured engagement with distributors, a pragmatic approach is to establish clear data-sharing expectations, setting out the type of information firms require from third parties to understand if their activities continue to support good customer outcomes, the standards the information should meet, and how it should be shared.
- In relation to intervening on out-of-target market distribution, the report states that one smaller firm identified, through a routine review of its distribution channels, that some individuals whose situation did not yet trigger a requirement to consider tailored support (because their debt was not yet unmanageable) were self-referring for this service via their website. As a result, the firm reminded its debt advisors of how to approach these situations, made updates to online content, and embedded other improvements to prevent recurrence. The firm saw fewer of these customers self-referring.