PIMFA
Four Outcomes
To comply with the new consumer principle (PRIN 12) – a firm must act to deliver good outcomes for retail customers – the cross cutting rules set out how firms should act to deliver good outcomes and are supported by the four outcomes relating to key elements of the firm-consumer relationship.
Given the interdependence of the four outcomes, appropriate product design and distribution to the target market, fair and appropriate communications, along with good customer service can help firms deliver good outcomes and evidence fair value.
Good Outcomes
To meet the rules under the four outcomes firms need to firstly consider what defines a good outcome. The FCA’s expectation is for an objective test for the average retail customer, and advise that firms should:
- Identify good consumer outcomes
- Consider the information needed to measure those outcomes
- Consider how do you evidence the outcomes
The focus for firms on delivering good outcomes is expected to be central to strategy and embedded across the firm/business model: it should be embedded in the same way as financial performance or risk.
The FCA recognise that it is not possible for all consumers to receive (or feel that they have received) a good outcome and advise that their focus will be on firms acting reasonably to deliver good outcomes.
Guidance on monitoring good outcomes is set out in the FCA’s Final non-Handbook Guidance (Chapter 11, page 114).
- OUTCOME ONE: PRODUCTS & SERVICES
The Financial Conduct Authority (FCA) have stated the aim of this outcome is to ensure products and services are specifically designed to meet the needs of consumers and sold to those whose needs they meet.
- The FCA aim to build on existing PROD rules in the Handbook (currently applicable to investment and insurance markets) to create similar standards across all retail products and services
- Existing product and governance and code of conduct frameworks as well as vulnerable customer strategies can provide a foundation for firms to build on to meet the requirements of the duty
Yasmin ATaullAH
Senior Policy Adviser
- OUTCOME TWO: PRICE & VALUE OUTCOME
The FCA aims to establish a consistent approach to price and value across financial services, although it has advised it does not intend to price cap through the duty: the aim is to make firms consider price in the context of fair value. The expectation on firms is to evaluate value through the life cycle of a product or service.
- The aim of the outcome is to ensure products and services offer fair value, with firms expected to test and monitor to determine if good consumer outcomes are being achieved
- The FCA will also expect firms to provide data to evidence the outcomes of their monitoring and testing activity
- OUTCOME THREE: CONSUMER UNDERSTANDING OUTCOME
This outcome is intended to be additive to Principle 7 (communications with clients): the FCA expect consumers to be given understandable timely information that helps them to make effective, informed decisions.
- The FCA’s expectations for communications to clearly set out key points in order for consumers to make a decision may result in complexity with existing regulatory requirements on disclosures, the advice and guidance boundary/firms acting under advice permissions
- Firms are advised to test and monitor the information they are providing consumers to ensure it is understandable
- OUTCOME FOUR: CONSUMER SUPPORT OUTCOME
Firms are expected to provide a level of support that meets the reasonable needs and expectations of consumers through the lifecycle of a product or service.
To comply, firms should focus on consumer outcomes and understanding along the customer journey, for example, consider:
- accessible communication channels to deliver customer service
- characteristics of vulnerability
- ease of transferring or exiting a product or service
The aim is to set an appropriate standard of support that all firms must provide, so that consumers can use the products and services they buy as anticipated without unreasonable barriers.
The Final non-Handbook Guidance (Chapter 9, page 92) sets out expectations on firms, noting the consumer support rules will set overarching expectations in this area, working in parallel with other rules that cover specific aspects of the servicing of customers e.g.:
- Firms should ensure their support processes avoid causing foreseeable harm and provide an appropriate level of support that ensures consumers do not face unreasonable barriers when exercising any rights or options
Examples of good and poor practice are provided under each of the four outcomes in the Final non-Handbook Guidance (Chapters 6-9, pages 38-92).
