Consumer Duty
Know your client - fully
The FCA’s Consumer Duty reinforces a simple principle: firms must be able to demonstrate that they genuinely understand their clients and deliver advice that supports good outcomes.
Rather than introducing an entirely new regime, Consumer Duty brings greater focus to how client objectives, preferences and understanding are identified, evidenced and reflected in advice processes.
Consumer Duty can be viewed as an opportunity to strengthen:
- informed client choice
- consistency across advice processes
- clarity in suitability documentation
It is about ensuring clients understand their investment preference pathway options (conventional, with ESG, sustainability or values-related) and are supported to pursue their own objectives.
Supporting clients’ financial objectives
(Cross-cutting Rule 3)
Clients’ financial objectives are not only limited to maximising returns. For some clients, how they invest matters; for others, it does not.
Consumer Duty expects firms to:
- avoid assumptions
- give clients the opportunity to express preferences
- support informed decision-making
A structured, neutral approach to exploring investment pathways helps ensure:
- all clients are treated fairly
- conversations are client-led, not adviser-led
- outcomes can be evidenced clearly
This applies equally to clients choosing conventional investments and those expressing sustainability or values-related preferences.
Consumer understanding
(Outcome 3)
Consumer Duty places increased emphasis on ensuring clients understand the information they are given, and are given sufficient time and context to make decisions.
In practice, this means:
- using clear, accessible language
- supporting explanations with appropriate educational material
- evidencing that informed choice has taken place
For example, asking a client about ESG or sustainability preferences is only meaningful if the client understands what those terms may involve. Providing balanced, pre-meeting information across all investment pathways supports consistency and compliance.
Client understanding and vulnerability
Consumer Duty recognises that client understanding, needs and circumstances may change over time.
Taking a proportionate approach to exploring preferences and objectives helps advisers identify when additional support, explanation or flexibility may be required - without assuming vulnerability or applying labels unnecessarily.
Preventing foreseeable harm
Preventing foreseeable harm is not limited to avoiding financial loss. It also includes avoiding harm arising from:
- unmet expectations
- misaligned objectives
- assumptions about client values or priorities
A structured approach that brings together:
- fact-finding
- attitude to risk and capacity for loss
- investment preferences and objectives
supports clearer suitability outcomes and reduces the risk of misunderstanding or complaint.
Fair value and pricing
Consumer Duty links value to client understanding and engagement.
Where clients understand:
- the advice process
- the options available to them
- how recommendations reflect their objectives
they are better placed to assess the value of the service provided. Clear preference conversations and transparent suitability explanations support this outcome.
Monitoring and evidencing outcomes
Consumer Duty is not limited to point-of-sale activity. Firms are expected to monitor whether advice and products continue to support good client outcomes over time.
A structured approach to recording client preferences and objectives supports this by creating a clear reference point for reviews, ongoing suitability assessments and client communications as circumstances or preferences evolve.
COBS - suitability and informed choice
(COBS 9A.2)
COBS already requires advisers to obtain sufficient information about:
- a client’s knowledge and experience
- financial situation and capacity for loss
- investment objectives
Investment preferences and objectives can include how clients wish to invest, not only what returns they seek.
Gathering this information is not a box-ticking exercise. Firms must be able to show that:
- clients understood their options
- preferences were explored neutrally
- outcomes were recorded consistently
This aligns with Consumer Duty’s focus on informed choice and clear audit trails.
PROD - distribution and target markets
(PROD 3.3)
Under PROD, advisers act as distributors and are expected to:
- understand the products they recommend
- ensure products align with the needs of the target market
- identify where products are not suitable
In practice, this means:
- understanding how products accommodate different preference pathways
- monitoring whether products continue to meet client needs
- avoiding recommendations where alignment is unclear
PROD, COBS and Consumer Duty operate together to support consistent, outcome-focused advice, rather than as separate compliance exercises.
💡If you’ve got questions, Accord Consulting offer practical and strategic support for advice firms, DFMs and fund groups - please contact us ✉️elly@inaccord.co.uk or ✉️lee@inaccord.co.uk