FCA Highlights Progress and Inconsistencies in Product Design Under Consumer Duty

The UK Financial Conduct Authority (FCA) has shared insights from its review into how financial services firms are designing, monitoring, and distributing products and services under the Consumer Duty framework. The regulator evaluated firms across three key areas: establishing robust product design from the outset, maintaining continuous product reviews, and managing outcomes when products are sold through third-party distribution chains. While the FCA noted encouraging signs of progress, it pointed out that compliance standards and operational practices remain inconsistent across the industry. According to the review, leading firms have adopted disciplined approaches by conducting in-depth research into customer needs, defining granular target markets, and embedding product governance directly into business-as-usual operations. Many firms have also improved how they track consumer outcomes by monitoring management information, including customer feedback, complaints, usage behaviors, and cancellation trends to resolve problems early. However, the FCA warned that some firms continue to define target markets too broadly or generically. This lack of specificity makes it difficult to assess whether products remain suitable for distinct consumer groups, especially those in vulnerable circumstances. The watchdog also identified weaknesses in how some businesses use monitoring data, noting instances where firms failed to connect collected insights to concrete governance actions or product modifications. Oversight of third-party distribution chains remains another area of concern. While proactive manufacturers actively set expectations, share data, and test whether intermediaries are selling products appropriately, others still have limited visibility over post-sale customer outcomes once third parties handle distribution. The FCA emphasized that product governance should not be treated as a one-off compliance exercise. The regulator urged financial institutions to reflect on these findings, address operational gaps, and ensure that products deliver fair value and meet consumer needs throughout their lifecycle.