Consumer Duty: How do you measure ‘Good Outcomes’? Read on...

The FCA's Consumer Duty is an initiative aimed at setting higher standards for consumer protection and ensuring that firms prioritise the best interests of their retail customers and comes into effect this year on 31st July.

It is part of the FCA's broader regulatory framework to enhance consumer protection in the financial industry. By setting clear standards and expectations, it aims to foster a culture of fair treatment and responsible conduct among firms, ultimately benefiting retail customers by improving the overall quality of financial products and services available to them.

One of the Principles is ‘Good Outcome’. Firms should take proactive steps to deliver good outcomes for retail customers. This involves considering the specific needs and circumstances of customers, providing suitable products and services, and offering fair and competitive pricing.

But how do we measure ‘Good Outcomes’?  Measuring ‘Good Outcomes’ in the context of the FCA's Consumer Duty is a complex task. The concept of ‘good outcomes’ generally refers to the positive results and benefits that retail customers should experience when interacting with financial firms and using their products or services. Surveys and feedback mechanisms can be used to gauge customers' satisfaction levels and their perceptions of the outcomes they have achieved. Monitoring the number and nature of customer complaints received by the firm can provide insights into whether customers are achieving desirable outcomes. A low volume of complaints or a high rate of successful resolution can indicate positive outcome.  Assessing customers' financial well-being can be a way to measure good outcomes. The quality of advice and the suitability of the recommendations can be indicators of good outcomes. Assessing whether customers' needs, preferences, and risk profiles are properly considered can help evaluate the effectiveness of a firm's actions.

But it’s worth noting that measuring good outcomes is not always straightforward, and different metrics may be applicable in different contexts. The FCA and other regulatory bodies often work with industry stakeholders to establish appropriate measurement criteria and standards. These metrics are intended to provide an objective assessment of how well firms are meeting the consumer protection objectives outlined in the Consumer Duty. A stated in Money Marketing: “Firms should also consider that vulnerability is a ‘moving target’ and that potential vulnerability concerns should be considered throughout the product lifecycle.”* 

There will undoubtedly be many discussions on this and many firms and IFAs who will have their own bullet list of what it takes to achieve a good outcome.  Ultimately, however, is it not simply down to honest and open communication and a financial adviser who wants to do what is right by the client?  An honest evaluation and interaction which determines the outcome of a financial planning discussion in which the client has had their needs understood and is presented with a solution that meets those individual needs.  A solution which lays out all of the charges and also the degree of risk and provides the client with a map of the present and also the future.  One which they have agreed is right for them and which they wish to own and accept.  We may ask ourselves why this has to be enshrined in a principle set out by the FCA. 

* https://www.moneymarketing.co.uk/opinion/consumer-duty-outcomes/