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The Consumer Duty policy statement describes the need for firms to have made assessment and judgement, acting as a ‘prudent’ firm, ultimately providing conduct and outcomes that mitigate the risk of harm or negative impacts to the consumer, the market, and the firm itself where factors could have a significant impact on meeting the Consumer Duty principles and obligations. This includes the nature of products and services offered or provided, the characteristics of retail customers (e.g., their degree of financial capabilities or vulnerabilities), and the firm’s role in relation to the product or service (including the role in the distribution chain).


A closer look at the policy’s key points

The below comes directly from the FCA PS22/9 as reference points to refresh firms’ knowledge on the expectations:


“A prudent firm will fully embed the Duty, act in good faith to meet its requirements, comply with all other relevant laws (for example the Equality Act 2010) and deliver good outcomes for consumers…The Duty consists of an outcomes-based set of rules that are designed to be more proportionate, scalable, and understandable for all firms.”


The cross-cutting rules require firms to:

  • Act in good faith towards retail customers
  • Avoid foreseeable harm
  • Enable and support retail customers to pursue their financial objectives


Importantly, firms are not required to protect consumers from risks that they understood and accepted. However, evidencing this in the case is critical. It’s also determined by what is within a firm’s control, based on their role and knowledge of the customer.


For example, unlike a non-advisory service, a firm providing an advisory service should understand more about the individual objectives of the customer and would need to act on that knowledge.


“Customers best understand their own circumstances and financial needs and objectives, but firms are expected to take responsibility for establishing an environment in which consumers can act in their own interests. Firms are not required to go beyond what could reasonably be expected of the firm delivering their products and services.

Products and services for consumers need to be fit for purpose and designed to meet the needs, characteristics, and objectives of the target group of customers and distributed appropriately.

Firms will need to consider the needs, characteristics and objectives of customers in their target market. They must take account of any particular additional or different needs, characteristics, and objectives that might be relevant for retail customers in the target market with characteristics of vulnerability. For example, some customers will have visual impairment, others will be suffering bereavement, or some may have low financial capability.”


It’s an essential aspect of the duty to ensure all consumers receive fair value:


“Value is about more than just price, and the FCA wants firms to assess their products and services in the round to ensure there is a reasonable relationship between the price paid for a product or service and the overall benefit a consumer receives from it.”


Firms’ communications to support and enable the customers intended to receive the communication to make informed decisions about financial products and services and are given the information they need, at the right time, and presented in a way they can understand:


“Firms need to provide a level of support that meets consumers’ needs throughout their relationship with the firm. This means firms’ customer service should enable consumers to realise the benefits of the products and services they buy and ensure they are supported when they want to pursue their financial objectives. Firms should monitor the support they provide, take relevant feedback into account, and look for signs that may indicate their channel offering is not sufficient to meet the needs of their customers. Where this is the case, firms should take reasonable steps to address any shortfall in the support they provide.

Meeting the needs of customers with characteristics of vulnerability. Our guidance on the fair treatment of vulnerable customers provides examples of how different vulnerabilities can make certain channels of support unsuitable. For example, some customers may find it difficult to take in information provided over the phone and have a need for written communications. Other customers may find written communications difficult to deal with and have a need for additional support. We expect firms to respond flexibly to the needs of customers with characteristics of vulnerability. So, firms will usually need to be able to provide support to their customers through different channels or by adapting their usual approach.”




Current activities: risk of harm assessment


Part of the next steps for firms may well be conducting a thorough thematic assessment of the ‘risk of harm’ across their business and legal entities. This will start with where it may arise and then move into risks and potential outcomes, with extreme or worst case type circumstances and also the more usual characteristics and journeys fully considered.


The PS describes what the expectations are for firms identifying impacts:

  • Where firms identify serious issues causing immediate consumer harm, they should prioritise action to remedy this.
  • This is particularly important where the harm is likely to be a breach of existing requirements (e.g., TCF).
  • Significant breaches of existing rules (including the Principles for Businesses) should be reported to the FCA, as required by SUP 15.3.11R in the supervision sourcebook.




Assurance review complexity


Undertaking a thematic assurance review of this nature is wide reaching, covering all customer journeys, entry, and exit points, with assessment of changing characteristics, events, vulnerabilities, and stress/shock scenarios. This includes the objective analysis of the consumer comprehension and opportunity to understand, assess, and appropriately decide on their options and desired outcomes and benefits, without unreasonable barriers, delays, steps, or costs preventing them from making decisions.


“Acting in a way that could reasonably be expected of a prudent firm requires more than adopting a single solution that is reasonable. It includes (among other things) considering whether the preferred solution provides good outcomes for all retail customers affected or only some; and if only some, why it does not work for all, and how best to identify additional actions which might mitigate the outcome for those adversely affected.”




Tackling key activities head on


Firms should consider a wide scale assessment to identify risk of harm across their consumer duty touchpoints, assess the impacts and potential outcomes and assess how they reasonably mitigate harm to consumers in accordance with the policy statement, principle 12, and the applicable rules.


Following the current state assessment, firms need action plans for any changes they may need to address and then ensure ongoing monitoring of the control environment, risks, and associated touchpoints. All of this will be critical and a key part of firms being able to demonstrate their capabilities and governance.


Remedial and enhancement actions resulting should be appropriately assigned, actioned, and evidenced accordingly and ongoing periodic reassessment conducted, supported by assurance reporting to the firms’ governing bodies.


Where Grath comes in


Grath has a specific assurance solution, with the ability to structure the initial risk of harm and wider consumer duty related assessment, assign owners for review work packages, record and progress any underlying actions, and link evidence within the platform to demonstrate the activity has been undertaken.


The Grath regulatory platform establishes:

  • Robust governance
  • Structured ongoing assurance reviews
  • Policy documentations and evidence
  • Automated oversight, reviews, attestations with clear management reporting, and information


We empower you to put the customer firmly at the heart of your governance solutions, help your teams to address and demonstrate your approach, set regular workflow and routines, evidence data and organisational arrangements, and report with confidence on consumer duty touchpoints and activities. All of this strives to give your management body and the regulator confidence in your capabilities and maturity.


Interested in learning more?


If you’d like to know how Grath’s technology can help with consumer duty, improve your regulatory compliance and bolster your risk management process, then we’d love to talk.


Get in touch with us at

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