Understanding the four outcomes of the Consumer Duty Act

The FCA is recommending the implementation of four outcomes that capture the essential components of the firm-consumer relationship, including how businesses develop, market, and support their goods and services, as well as the crucial touchpoints in the customer journey. The FCA anticipates that these four results will evolve and offer further clarity about what is expected of businesses in terms of seeing the Consumer Principle and relevant cross-cutting regulations.

So, what exactly do these four outcomes mean for your organisation and how can the contingent workforce help you ensure that this new Consumer Duty Act is achieved?

Outcome 1: Products & Services

The FCA’s suggestion for the goods and services result mainly aim to strengthen the firms’ current obligations for product governance. The Consumer Principle and the cross-cutting regulations should be used as a guide when expecting businesses to adhere to these commitments.

For instance, the FCA requires businesses to account for expected customer behavioral biases and product features that can prevent customers from behaving in their best interests during the design phase (i.e., sludge practices, unreasonable exit fees, etc).

The FCA also emphasises the function of distributors, especially those in the supply chain who do not directly interact with customers. All parties in the retail customer distribution chain are meant to fall inside the purview of the consumer principle, but in a way that is equal to their impact on the development, management, and distribution of the pertinent good or service. As a result, companies in the distribution chain may want to renegotiate their distribution contracts in a manner similar to co-manufacturing contracts, where the parties’ regulatory responsibilities for specific aspects of the product or service are explicitly delineated.

Manufacturers and distributors who have direct customer relationships (such as advisory firms) may also want to add more management information/reporting requirements to their distribution contracts to make sure that their product governance frameworks have the data they need to conduct processes for product approval and review that are compliant with the Consumer Principle.

In order to guarantee that their internal product governance processes are in line with the expectations of the Consumer Principle, businesses may also need to consider the extent to which they will need to review and change them. For instance, businesses may need to prioritise some issues more in the design process moving forward.

Outcome 2: Customer support

According to the FCA’s recommendations, businesses should continually support their customers by providing them with the information they need to make wise decisions about the financial goods and services they use. This basically implies that businesses will have to make sure that customers receive the information they need when they need it, and in a manner that makes sense to them.

This result is understandably largely concerned with businesses’ marketing initiatives, financial promotions, and pre-sale consumer journeys. It is crucial to keep in mind that this result is meant to include every customer communication the company has ever had (during the course of a product or service’s whole lifecycle).

The FCA has cited “sludge practises,” in which businesses intentionally add friction to the customer experience in an effort to achieve more favorable results for the business (i.e., prevent the customer from cancelling or switching a product or service), as an example of behaviour that would be incompatible with this result.

Following the FCA’s proposals, businesses must take the Consumer Principle into account when approving or reviewing any communications they send to customers. Businesses must also keep track of how these communications are received and conducted to find whether they are having the desired effects. In order to achieve these regulatory standards in practise, businesses may need to evaluate the level of management information they currently get about their communications and seek future improvements.

Outcome 3: Price and value

This fourth result stands for a more substantial step for the FCA’s approach to firm supervision because the three outcomes mentioned above primarily expand on already-existing regulatory principles and standards. Although the FCA has said that it does not aim to regulate prices or intervene in the market (at this time), its expectations around price and fair value are likely to offer a new challenge for businesses.

According to the FCA’s proposals, this outcome is meant to guarantee that goods and services are suitable for their intended use and fairly priced. Therefore, businesses must make sure that the advantages of the goods and services they supply customers are acceptable in relation to their costs.

The FCA’s recommendations also address the expected price structures that firms should employ, in addition to expectations that focus on the transparent presentation of cost information to clients.

The FCA anticipates businesses to evaluate whether various or flat rate pricing structures are suitable for the pertinent client segments. The FCA has specifically said that they may think flat rate pricing schemes are incompatible with this result where the fees are volume-based but the firm’s costs for this service are not directly related to this price structure.

Outcome 4: Consumer understanding

All sides of the company’s relationship with customers are meant to be covered by the FCA’s customer service suggestions. In reality, we expect that this result will mostly centre on the customer’s post-purchase interactions with the business. The FCA’s explanation of this finding, which outlines their expectation that customers should be able to realise the benefits of their product(s) or service(s) and should not be prevented from acting in their own interests, reflects this.

The FCA’s suggestions for customer benefits centre on worries that businesses create post-sale procedures to try and prevent consumers from taking advantage of their products or services or unnecessarily impede customers from acting in their best interests.

Examples given by the FCA are companies that significantly impede insurance claim procedures or marketing practices that try to make it difficult for customers to drop using a product or service.

The FCA’s proposal also mentions the fact that companies will need to design their customer service procedures to prevent customers from incurring financial or non-financial costs (such as the need to spend a lot of time or effort), and that this may have a significant impact on the resources that companies will need to devote to customer service in the future.


How can the contingent workforce help your transitional efforts

All firms that “have a material influence over, or determine, retail customer outcomes” will be facing a significant amount of work alongside resuming BAU activities. It is within the firms’ best interest to ensure that a robust Consumer Duty Act plan is forged and that all nuances of implementation are understood and actioned.

Many are turning to the contingent workforce, not just for the access to key skills needed to ensure transitional efforts are met but to ensure that large portions of BAU are resumed and new compliance needs are met. The contingent workforce can ensure that you reach your Consumer Duty outcomes swiftly and efficiently.

Momenta are a global contingent resource solutions firm. For over 30 years we have been partnering with companies in the financial services, legal, technology and training, and development sectors to cost effectively provide the right people, with the right skills, at exactly the right time. Momenta will provide you with added resource in several key areas, allowing you to focus on the strategic oversight of the project while we help implement your vision.

This flexibility allows you to ensure there is always the right balance for your team to deliver a far more effective solution which will help the results delivered to your client. Momenta also specialises in scaling resource requirements up and down during the lifetime of a project in order to meet all key requirements plus cost control whilst keeping delivery capacity and capability. Given the mammoth task ahead, Momenta can supply built teams to support in all aspects of the transition from:

  • Finding key risks for all portfolios affected by consumer duty
  • Testing outcomes at the vert level of customer journey and monitoring consumer outcomes set to full requirements of the duty
  • Cost of living expectations for clients met to meet the needs of Dear CEO letter from the FCA
  • Implementation plans and be able to show they have scrutinised and challenged the plans to ensure they are deliverable and robust to meet the new standards.
  • Complete all product and service reviews necessary to meet the four outcome rules for their existing open products and services and have shared with distributors to enable distributors to meet their obligations under the Consumer Duty.
  • Internal training and development for internal staff to build Customer Duty Culture
  • Ensuring all new products and services, and all existing products and services that stay on sale or open for renewal.
  • Communication with the end customer about any new changes to the plan or policy

If you require assistance in the form of additional resource, contact us today to see how we can help to ensure your firm is prepared for all Consumer Duty transitional efforts.



Works cited:
FCA (2022a). This relates to. [online] Available at: https://www.fca.org.uk/publication/policy/ps22-9.pdf [Accessed 18 Oct. 2022].
FCA. (2022b). Consumer Duty. [online] Available at: https://www.fca.org.uk/firms/consumer-duty#:~:text=The%20Consumer%20Duty%3A [Accessed 18 Oct. 2022].
PricewaterhouseCoopers (n.d.). The FCA’s new consumer duty: Raising the bar on consumer outcomes. [online] PwC. Available at: https://www.pwc.co.uk/industries/financial-services/understanding-regulatory-developments/fca-proposes-new-consumer-duty-in-paradigm-shift-for-firms.html [Accessed 18 Oct. 2022].