• Act in good faith toward retail customers.

• Avoid causing foreseeable harm to retail customers.

• Enable and support retail customers to pursue their financial objectives.

The FCA requires that firms ensure that products are designed to meet the needs, characteristics and objectives of a target group of customers and are distributed appropriately. The FCA has introduced new product governance rules that apply across all sectors. The requirements will, however, not apply where products are subject to existing product governance rules in PROD 3 (MiFID), PROD 4 (IDD and pathway investments) or PROD 7 (funeral plans).

Action required:  

• Enhance how you design, distribute and price your products to deliver fair value. 

• Collect additional product, distributor and service information to inform your decisions.

The FCA wants all consumers to receive fair value. This is not just about price, but ensuring that there is a reasonable relationship between the price paid for a product or service and the overall benefit a consumer receives from it.

The Consumer Duty does not require firms to charge all customers the same amount – differential pricing between new and existing customers is not prohibited - provided that upfront discounts are clear, transparent and the firm can justify that both groups are receiving fair value. The FCA also confirmed that the rules are not intended to prevent cross subsidies between products or require firms to move onto cost plus pricing.

The consumer understanding outcome is designed to ensure that firms support and enable consumers to make informed decisions about financial products and services. Firms will be required to provide information consumers need, at the right time, and presented in a way they can understand.

The consumer support outcome requires firms to provide a level of support that meets consumers’ needs throughout their relationship with a firm. Firms will be required to: design and deliver support to retail customers in a way that meets the needs of all retail customers (including those with characteristics of vulnerability); ensure that retail customers can use their product as reasonably anticipated; ensure that they include appropriate information in customer journeys to mitigate the risk of harm; and ensure that retail customers do not face unreasonable barriers during the lifecycle of the product, e.g. to switch or transfer a product, to access a benefit, to make a complaint or cancel a contract.