FCA urges firms to improve how customers understand financial products under Consumer Duty

The FCA has warned that many financial services firms still need to strengthen their approach to customer support, despite improvements since the introduction of the Consumer Duty.

In a recent review of firms’ approaches to the 'consumer understanding' outcome, the FCA said that while many organisations have made progress, others are falling short in areas such as understanding their customers, ensuring support is accessible after a sale, and embedding the right culture across the business.

The findings form part of the regulator’s ongoing work to assess how firms are implementing the Consumer Duty, which came into force for open products in July 2023 and requires firms to deliver good outcomes for retail customers.

Although the review covered firms of different sizes and sectors, the regulator emphasised that the lessons apply widely across the industry – particularly for smaller firms that may rely on simpler processes or smaller teams.

The FCA said the most effective firms put customer needs at the centre of their support models. This includes designing service channels around how customers interact with the business and ensuring staff are trained to help customers pursue their financial objectives.

Some firms have already taken steps in this direction. For example, the regulator noted that several businesses mapped their entire customer journey to identify unnecessary barriers that make it harder for customers to resolve issues or access support. Others ensured staff gained first-hand insight into customer experiences by spending time with support teams or engaging directly with customer feedback.

However, the FCA’s review also highlighted a number of weaknesses that continue to undermine customer outcomes.

One of the most significant gaps is that some firms still lack a clear understanding of their target market. Without this, support services may not be designed around the needs of customers – particularly those with vulnerabilities or specific communication needs.

In some cases, the regulator found firms had prioritised sales or customer retention over good outcomes. Target market definitions were sometimes focused primarily on generating sales rather than identifying the characteristics, needs and objectives of customers. This approach risks creating support systems that fail to address real customer requirements.

Another recurring issue is the imbalance between pre-sale and post-sale support. While firms often invest heavily in making it easy for customers to buy products, the FCA found that accessing help afterwards can be significantly harder.

Examples of poor practice included long waiting times for existing customers, limited access to information, and processes that made it more difficult to exit a product or service than to purchase it. The regulator said firms should ensure that customers can make changes, switch products or close accounts just as easily as they can open them.

Culture and internal accountability also remain a challenge in some organisations. According to the FCA, some firms were unable to demonstrate meaningful steps taken to embed Consumer Duty principles across their workforce.

In particular, the regulator found that staff were not always given sufficient training to handle complex customer conversations or identify circumstances where tailored support might be needed. Firms also sometimes struggled to show how their internal governance, incentives and performance frameworks aligned with delivering good customer outcomes.

Monitoring outcomes is another area where firms have room for improvement. While many businesses collect customer data, the FCA said some are not using it effectively to identify emerging risks or patterns of poor outcomes.

For example, firms may track complaints or service metrics but fail to analyse the data across different customer groups, meaning problems affecting vulnerable customers may go unnoticed. In other cases, firms identify issues but fail to measure whether corrective actions actually improve outcomes.

Despite these shortcomings, the regulator highlighted several practical steps smaller firms can take to strengthen their approach without significant investment in complex systems.

One of the simplest is building a deeper understanding of customers. Smaller firms often have closer relationships with their client base and can use this advantage to gather feedback through regular conversations, surveys or user testing. Even informal reviews of customer experiences can help identify barriers or service gaps.

Some smaller firms cited by the FCA used direct contact with customers to maintain an up-to-date understanding of their circumstances, allowing them to tailor support and ensure products continued to meet customers’ financial objectives.

Another key step is reviewing the entire customer journey. Firms should consider whether customers can easily access help across all channels – including phone, digital services and written communication – and whether processes inadvertently discourage customers from seeking support.

The regulator also encourages firms to monitor a broader range of customer outcome metrics. This could include analysing complaints, call-centre interactions or customer feedback to identify potential risks earlier. Tools such as speech analytics or structured feedback programmes can help firms understand how customers experience their services in practice.

Finally, firms are urged to ensure the Consumer Duty is embedded across the organisation, rather than treated as a compliance exercise. The FCA has emphasised that responsibility for good customer outcomes should be shared across the business – from product design and marketing to customer support and senior leadership.

As the Consumer Duty continues to bed in across the sector, the FCA has signalled that firms which fail to address these issues risk further scrutiny — particularly where poor communication leads to consumer harm.