Consumer Duty Two Years On: What Finance Teams Learned

It is two years since the Consumer Duty extended to closed products and services, and roughly three since it first applied. Long enough for firms to have produced several annual board reports, been through supervisory engagement, and discovered where their arrangements were weaker than they assumed. The pattern that has emerged is consistent and it is not the one most firms expected: the difficulty has been much less about compliance frameworks and much more about finance data that nobody had ever needed to produce. This piece sets out what finance functions have actually learned, what they fixed, and what still catches firms out.

For the rules themselves, the FCA’s Consumer Duty pages remain the authoritative source. Our guide to Consumer Duty MI covers what finance has to produce; this piece is about what firms discovered in doing it.

Lesson one: the hard part was product costing, not compliance

The fair value assessment requires a firm to demonstrate that what a customer pays is reasonable relative to the benefit they receive. Doing that properly needs the cost of providing the product, the revenue earned from it, and the margin by product and by customer segment.

A great many firms discovered they had none of that at the required granularity. Revenue was tracked by entity or channel rather than product; costs were allocated to departments rather than to products; and nobody had ever needed a customer-segment view because no regulation had asked for one.

That is a management accounting build, not a compliance exercise — ordinary costing principles of the kind the CIMA syllabus covers, applied at a granularity nothing previously required, and it takes months rather than weeks. Firms that treated the first board report as a documentation task and only then discovered the costing gap lost a year. The ones that recognised it early started the costing work as a finance project in its own right — which is the single most useful thing any firm still catching up can do now.

Lesson two: taxonomies that will not reconcile

The second recurring discovery, and the one that persists longest. Compliance counts complaints by one product hierarchy. Finance reports margin by another. Operations tracks service metrics by a third. The board then asks the obvious question — are the products generating the most complaints also generating the highest margin? — and nobody can answer it without a week of manual mapping.

The firms that solved this did something unglamorous: they agreed a single product taxonomy across finance, compliance and operations, and mapped everything to it once. It is a data governance exercise rather than a regulatory one, and it pays back every year thereafter. Our guide to data quality and the finance function covers the general discipline.

Lesson three: averages conceal exactly what the Duty asks about

Early board reports were frequently built on aggregate figures — average margin, overall complaint rates, total remediation cost. The regime is concerned with outcomes across customer groups, including those with characteristics of vulnerability, and an aggregate view is structurally incapable of showing that.

The uncomfortable finding for several firms was that a product delivering fair value on average was delivering poor value to an identifiable group — long-standing customers on legacy pricing, or a segment paying for features they never used. That is precisely the finding the exercise exists to surface, and firms that segmented properly found it in year one rather than having it pointed out to them later.

Lesson four: annual assembly is visible

The rules expect firms to monitor outcomes and review them regularly. A board report assembled in the six weeks before it is due reads exactly like what it is, and it produces two problems: the data is retrospective rather than monitored, and the finance team is doing a year’s work in a quarter alongside everything else.

The firms that settled into this well moved the core measures into the regular reporting cycle — product margin by segment, complaints mapped to products, remediation cost tracked as it arises — so the annual report became a summary of what the board already knew. That is what the regime intends, and it is considerably less work in aggregate than the alternative.

Lesson five: nobody owned it

The structural finding, and the one that explains most of the others. The Duty sits across finance, compliance, product and operations. Where no single person owns the MI end to end, it is produced by whoever is available, differently each time, with different definitions.

Naming an owner is the single most effective organisational decision available here — and where the responsibility is formally allocated, the SM&CR framework determines to whom, and the firms that have done it report a considerably easier cycle. In practice the owner tends to sit in finance in mid-sized firms — usually a finance business partner or FP&A role rather than a control one, because the work is analytical and cross-functional.

What still catches firms out

Four things, two years on.

Foregone revenue is under-evidenced. Where a firm has chosen not to charge, waived a fee or exited a product on fair-value grounds, that is direct evidence of the Duty operating — and it shows up in finance’s numbers rather than anywhere else. Firms routinely fail to capture it.

Distribution chains. Where intermediaries or partners sit between the firm and the customer, the total cost to the customer across the chain is what matters. Firms with visibility of only their own margin have an incomplete picture.

Legacy and closed books. The population where value questions are most likely to arise and the data is oldest and worst.

And key-person concentration. The MI is frequently produced by one person who understands the mapping, with none of it documented — the same pattern seen across regulated finance generally.

What this has meant for hiring

The Duty has created demand for a profile that barely existed three years ago: someone who can do product-level and segment-level commercial analysis and understands what the output has to demonstrate. That is finance capability plus regulatory literacy, and the combination is scarce.

Two practical points for firms recruiting into it. Specify the analytical half properly — a candidate who can build product margin by customer segment from imperfect data is more valuable than one who knows the rules but cannot produce the numbers. And test the joinability problem directly: ask how they would produce margin by segment where the finance system and the customer system define products differently. It is the real work, it is unglamorous, and the answer separates people who have done this from people who have read about it. Our guide to hiring regulatory experience covers the wider specification question.