UK FCA findings on approach to consumer understanding outcome under the consumer duty

The UK Financial Conduct Authority (FCA) has published findings from its review into how firms approach and apply the consumer understanding outcome under the consumer duty. The FCA sets out expectations for how firms, regardless of size, should design, test and govern customer communications to ensure retail customers can make informed decisions, with approaches applied proportionately to a firm's scale and resources.

The FCA identified several areas where firms need to improve, including weak evidence of communication testing, inaccessible or overly complex communications, insufficient consideration of diverse customer needs, weak monitoring, and unclear accountability for who is responsible for decisions and how they are made.

The FCA highlights effective approaches to strengthen communications and meet expectations including:

• Using insight to identify where consumers struggle—by analysing insights from multiple sources, such as call listening, complaints, chat transcripts, website analytics and surveys. This evidence should be reviewed regularly and meaningful improvements should be prioritised.
• Testing communications with real customers—by testing both before and after changes whether understanding improves. Firms should use proportionate tools such as surveys, comprehension checks and feedback from frontline interactions.
• Communicating clearly, simply and accessibly—by using plain language, clear structure, visual hierarchy and layered content. Essential information, risks and exclusions should be presented upfront and available in alternative or accessible formats for those who need them.
• Well-designed customer journeys—which incorporate calculators, videos, walkthroughs and summaries. These tools should be user tested and refined.
• Supporting customers with characteristics of vulnerability—by identifying needs early, adapting communications accordingly and embedding vulnerability considerations into governance, training and testing.
• Clear, fair and balanced financial promotions—by ensuring content is balanced, accessible and easy to understand, with equal prominence for benefits and risks. Firms should test that key messages (including eligibility criteria and limitations) are properly understood.

All of which must be supported by appropriate governance and oversight, embedded into everyday business processes.

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