Consumer Duty

Understanding Consumer Duty

Consumer Duty

Consumer Duty

The FCA desires all firms to put their clients at the heart of their business by offering products and services that are fit for purpose and represent fair value. The FCA intends to do this by introducing the Consumer Duty, their new principle to ensure that “good outcomes” are the industry standard. 

The Consumer Duty will apply to products and services offered to retail customers. The scope of the Consumer Duty includes firms that are involved in the manufacture or supply of products and services to retail customers, even if they don’t have a direct relationship with the end client.

The Consumer Duty is a package of measures with three main elements:

The Consumer Principle: “A firm must act to deliver good outcomes for retail customers” will be inserted as a new Principle 12 into the FCA Principles for Businesses Sourcebook. 

There is some overlap between the FCA’s proposed new consumer principle (a firm must act to deliver good outcomes for retail customers) and the existing Principle 6 (a firm must pay due regard to the interests of its customers and treat them fairly) and Principle 7 (a firm must pay due regard to the information needs of its clients, and communicate information to them in a way which is clear, fair and not misleading).

We know that these existing Principles and TCF (treating customers fairly) outcomes are central to a firm’s propositions, therefore the new Consumer Duty should not materially change the way a firm does business. However, it does go further than the existing principles, by requiring firms to focus much more on consumer outcomes and understanding throughout the customer journey.

The Cross-cutting Rules: these outline the FCA’s expectations of firms and mean that a firm must take all reasonable steps to avoid foreseeable harm to customers, enable customers to pursue their financial objectives, and act in good faith towards customers.

The Four Outcomes: these build on the Consumer Principle and the Cross-cutting Rules and represent the FCA’s expectations of the firm in its relationships with its clients: These are Communications, Product Design, Customer Service, and Price and Value.
It will mean that consumers should receive communications they can understand, and products and services that meet their needs and offer fair value, and they get the customer support they need, when they need it.

The FCA is clear that the new Consumer Duty personifies a “significant shift in culture and behaviour” and a ”‘higher standard of care and expectation ” that should be embodied throughout a firm. The Regulator expects all senior managers to be clear about the changes in culture and behaviour that it expects the Consumer Duty to bring about.

For us, the Consumer Duty will be the continuation of the evolution of the process that we already practise. We consider every step of our clients’ financial journey, from first meetings to the recommendation we supply and everything in the middle. Here at Thorntons Investments, this rationale has always been part of our ethos when supporting our clients in their financial journey.


The views expressed are those of Thorntons Investments.  The contents of the article are solely for information purposes and are not intended as advice.

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