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Why this matters.
The FCA’s Consumer Duty sets a higher standard of care for every authorised firm whose products or services reach retail customers. It is made up of Principle 12 (“a firm must act to deliver good outcomes for retail customers”) and the detailed rules in PRIN 2A of the FCA Handbook, made under the FCA’s rule-making powers in section 137A of the Financial Services and Markets Act 2000 and following the requirement in section 29 of the Financial Services Act 2021 for the FCA to consult on a duty of care. It applied to open products from 31 July 2023 and to closed products from 31 July 2024. The Duty covers brokers, IFAs, mortgage and insurance intermediaries, consumer credit firms, payment and e-money firms and appointed representatives as well as large providers, and it reaches every firm in the distribution chain that can influence a retail customer’s outcome.
Firms must meet three cross-cutting obligations (act in good faith, avoid causing foreseeable harm, and enable and support customers to pursue their financial objectives) and evidence good outcomes in four areas: products and services, price and value, consumer understanding, and consumer support. Customers in vulnerable circumstances need particular attention. The board or equivalent governing body must review and approve a report on whether the firm is delivering good outcomes at least once a year. The FCA has made the Duty central to its supervision, and failings can lead to required redress for customers, restrictions on a firm’s permissions, public censure and financial penalties under FSMA Part XIV. Small firms often have the right intentions but no written evidence, and that gap is where reviews tend to go wrong.
