UK Financial Conduct Authority Review of Implementation of Price and Value Outcome Under Consumer Duty

The Financial Conduct Authority has published its findings from the first year of the implementation of the price and value outcome under the Consumer Duty. The specific focus of the price and value outcome rules is to ensure that the price a customer pays for a product or service is reasonable compared to the overall benefits they receive. Firms are expected to think about price when assessing fair value, but it should not be the sole consideration. The FCA rules do not set prices, require prices to be low or require firms to charge the same as competitors. However, the FCA requires firms to assess whether they are providing fair value and act if they are not.

The review focused on three areas: cash savings accounts, guaranteed asset protection (GAP) insurance and cash balances held by platforms. The FCA emphasizes that these are general findings for all sectors to consider; however, there may be specific challenges certain sectors face in assessing the value of their products and services. The FCA's key messages to firms are:

• The outcomes of the Consumer Duty should be considered holistically.
• Effectively identifying target markets helps in assessing impacts on different customers.
• An analysis of cross-subsidies, where relevant in a firm's business model, can be helpful in identifying where different consumer groups may be at risk of not receiving fair value.
• Evidence is vital in fair value assessments, but firms should be proportionate in their approach.
• Prompt action should be identified and taken if fair value assessments show consumers are at risk of not receiving fair value.

The FCA is working with firms to ensure they are taking an appropriate and proportionate approach to the price and value outcome. However, the FCA states that it will act where it sees firms not making improvements in response to feedback, or if firms' products and services are clear poor value outliers when compared to the price and value of similar products and services. The FCA also notes that it is conscious of the need for specific engagement with small firms as it continues to embed the Consumer Duty and does not expect a small firm to apply the same resources or processes to assessing fair value as a large firm. As such, the FCA separately highlights throughout the document how small firms might take a reasonable approach to the requirements of the price and value outcome.

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