In the Financial Conduct Authority’s (FCA’s) review into firms’ approaches to products and services under Consumer Duty requirements, it said that when asked how products and services were adapted to meet the needs of consumers with vulnerabilities, many focused on the processes in place to identify them.
It said: “These are encouraging steps, but firms should also consider how – once additional needs have been identified – they can meet those needs.”
The regulator found examples of good practice in this area, such as firms starting the product or service design or review process by researching the needs, characteristics, objectives and likely behaviour of their prospective customers.
This was then used to create several customer profiles, where firms identified if their proposition met the needs of each profile.
Some firms also used a ‘negative target market’ concept to identify customers that their products or services would not suit.
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Further, where firms are required to monitor customer outcomes and review this regularly, the regulator found that many tracked defined outcomes through routine and risk-driven reviews, but others did not use management information (MI) to “trigger targeted, risk-driven reviews when potential issues emerged in relation to customer outcomes”.
“Firms are required to act in good faith and take appropriate action on potential harm identified in their MI,” the FCA said.
The FCA found examples of good practice when monitoring outcomes, such as dashboards comprised of customer complaints, feedback and queries, while others tracked customer behaviour as potential indicators of poor outcomes, such as the low use of products or cancellations.
Charlotte Clark, director of cross-cutting policy and strategy at the FCA, said: “Overall, we found encouraging signs of progress. Many firms are strengthening their product governance, monitoring outcomes better, and taking more ownership of what happens after they sell a product. These changes help ensure products and services continue to meet consumers’ needs, and that firms can spot and deal with problems earlier.”
Clark said firms should use the FCA’s findings to identify where improvements can be made across their own products and services.
She added: “This insight is intended to help firms learn from each other and build on what’s already working. The examples of good practice show that there’s no single way to deliver good outcomes; firms should apply the duty in a way that is proportionate to their size, role and customer base. We’ve included examples from smaller firms to reflect this flexibility.”
This week, the FCA revealed it had opened 11 investigations into potential breaches of Consumer Duty since the rules came into effect.
