FCA warns Consumer Duty data does not prove good outcomes

The Financial Conduct Authority (FCA) has warned firms that collecting Consumer Duty data alone is not enough to demonstrate that customers are receiving good outcomes.

The regulator said some firms have not been able to show how management information had informed their decisions, what action they had taken or whether subsequent changes had improved customer outcomes.

Its findings were based on a survey of 56 firms across a range of sectors, sizes and business models, alongside a review of board reports and responses to information requests.

The FCA said: “Collecting data, listing metrics or reporting management information will not, by itself, show whether customers are receiving good outcomes.”

Firms should instead be able to explain what their information tells them, how it identifies risks, what action they have taken and how they assessed whether that action was effective, the regulator said.

It found some firms relied on lagging indicators, had unclear thresholds or lacked a complete audit trail between identifying an issue and improving the customer’s outcome.

One firm monitored issues including onboarding changes, payment instructions and clients holding high levels of cash, but could not consistently evidence what information had been discussed, where it had been challenged or how the impact of its actions had been measured.

Vicky Pearce: Making Consumer Duty evidence count

The FCA also highlighted firms using thresholds for complaints, file-review pass rates, client retention and mortgage-review engagement without being able to explain why those thresholds represented good or poor outcomes.

It said stronger firms could demonstrate why each measure was relevant to identifying potential customer harm.

The regulator also warned firms against assuming that introducing a new process, piece of technology or checklist was evidence of improvement.

Some firms agreed remedial actions after identifying problems with customer support, but later evidence showed customers were still being passed between agents and complex cases were not always resolved at the first attempt.

The FCA said firms should test whether changes had reduced repeat contacts, unresolved customer journeys and avoidable customer effort.

“A new tool or checklist, by itself, does not necessarily show that customer outcomes have improved,” it said.

However, the regulator stressed that smaller advice firms do not need complex monitoring systems or large compliance teams to meet its expectations.

It said smaller firms could use a focused set of indicators, including complaints, customer feedback, missed service standards and file checks, provided these were clearly linked to potential harm and followed by documented action.

Responsibility for monitoring outcomes could sit with a senior individual, supported by a straightforward log recording issues, agreed actions, deadlines and whether problems had been resolved.

The FCA said smaller firms could also review calls, client files and complaints as part of their day-to-day oversight and look for recurring errors following changes to processes, communications or staff guidance.

It made clear that boards and senior managers are also expected to consider customer outcomes throughout the year, rather than treating the annual Consumer Duty assessment as a standalone compliance exercise.

The regulator pointed to stronger firms that used action plans with named owners and reported on whether remedies had been completed and delivered the intended results.