Corporate Insights Podcast | Delivering the Duty – Producing the annual Duty Board Report

Welcome to the Corporate Insights Podcast.

Today, we're talking about an important requirement for FCA regulated financial services firms, the annual consumer duty board report. This is a quick reminder for our FCA regulated clients, especially the smaller firms, on what good looks like when preparing your report and what to avoid.

I'm Louise Neave. I'm a partner at Weightmans, and I help financial services firms who are regulated by the FCA with navigating the regulatory requirements to help them carry on compliant business.

And I'm Emma Collins. I'm a principal associate in the commercial team at Weightmans advising on consumer protection law. I work with Louise to help clients build compliant, consumer friendly journeys, and product life cycles.

So first, let's take a moment to recap on the consumer duty itself.

Rather than simply ticking boxes or meeting minimum standards, firms are expected to actively deliver good outcomes for their retail customers. Firms must act to deliver outcomes that are fair, clear, and support consumer financial well-being.

This standard is enshrined in principle twelve of the FCA's principles for businesses. A firm must act to deliver good outcomes for retail customers.

Exactly. The consumer duty raises the bar for how financial firms must treat retail customers. It came into force on the thirty first of July twenty twenty three and extended to close products on the thirty first of July twenty twenty four.

The duty is structured around three parts, one overarching principle, three cross cutting rules, and four customer outcomes.

So let's break that down. There's the overarching principle, principle twelve, that requires firms to act to deliver good outcomes for retail customers. Then there's a cross cutting rules. Firms need to act in good faith towards their retail customers, avoid causing foreseeable harm to retail customers, enable and support retail customers to pursue their financial objectives.

And then we have the four key outcomes that set out what good looks like. Products and services must be fit for purpose and designed to meet the needs of identified customer groups.

Price and value. The price paid by customers must be fair and reflect the value that the customer receives. We've got customer understanding. Customer should be provided with communications that they can understand to support their informed decision making.

And then we have customer support. Customer should be able to access and receive effective support that meets their needs throughout their relationship with the product provider.

In addition, there are specific requirements for governance.

At least annually, a firm's governing body must review and approve a report following monitoring of customer outcomes, sign off the report to confirm whether they believe the firm is complying with the duty, assess whether the business strategy aligns with duty principles and supports good customer outcomes, and describe and agree actions taken or to be taken to improve where outcomes fall short.

The annual board report is a key requirement. It's not just a document. It's a formal review by the board of where the customers are getting the outcomes they should.

The board must review and approve the report.The FCA wants to see real oversight, not just a tick box exercise.

Yes. Boards are expected to show clear oversight, challenge, and direction. Firms are expected to monitor the outcomes continually, not just annually, and to use meaningful data to evidence the customer outcomes and experiences, whether they're good or poor. It's not only about compliance. It's about culture and accountability at all levels.

It's for good governance as much as it is a regulatory requirement.

So what does a good report look like?

In December, the FCA published its findings following a review of one hundred and eighty board reports submitted last July.

We'll take you through their findings and turn them into practical advice that could help with any last-minute improvements to your next report due to be completed in July. The FCA identified several common strengths in the better reports.

Louise, what do you think stood out?

Well, Emma, my take from the FCA's findings is that the better reports had five key features. First, there's a clear focus on and structured around the four duty outcomes, products and services price and value, consumer understanding, and consumer support, each with a clear assessment of outcomes.

The reports included dedicated sections with key findings, data trends, risks, and improvement plans. Next, there was a use of meaningful high-quality data.

Data was not only provided but analyzed and explained. The reports linked the MI with customer stories and trends.

This meant presenting balanced and meaningful data across customer journeys.

Perhaps a better report set outcome thresholds and justified them. For example, if a firm reported a percentage call abandonment rate, they then explained what good looks like and why their threshold was set at the rate it was.

There was also an analysis of and focus on different customer groups. Perhaps a better report showed how outcomes varied between customer segments?

The reports didn't just split customers by product, but explored outcomes across demographics, life cycle stages, and vulnerable characteristics.

Some firms provided dashboards tracking outcomes for over ten customer subgroups. It's also important for involvement across the business areas.

Involvement from across the business, ensuring contributions were captured from across first, second, and third line functions such as marketing, customer servicing, and complaints teams, not only from risk and compliance, where there's a clear commitment to culture and accountability.

Good reports evidence the tone from the top, senior leaders' reflections, and the lessons learned. MI was provided covering internal training given, staff incentives, and how these align with customer outcomes and feedback from employee surveys.

Examples of some better practices suggested by the FCA included where one firm added QR codes to printed letters to gain more customer feedback.

Another tied complaint spikes to staffing issues and adjusted their resourcing. One firm reviewed more than six hundred and fifty communications and found ninety nine percent needed changes.

They summarised this for the board and included case studies on how updates improve clarity for customers. Another firm included a staff case study where frontline training led to an improvement in customer satisfaction for a targeted vulnerable group.

That shows the link between insight, action, and impact. These examples showed smart, useful insights. So let's look at some common mistakes as well.

Unfortunately, not all reports quite hit the mark. The FCA highlighted several recurring mistakes, which we'll talk you through so you can try to avoid making the same mistakes.

Some reports had no clear definition of what a good outcome means. There was poor data quality and interpretation, meaning some reports lacked robust MI or presented large volumes of data but failed to explain what the data meant or to draw conclusions.

Rag ratings were used without justification or clear commentary to explain the data was lacking. Some reports missed reporting on oversight of their distribution chain and outsourced services or didn't explain how the firm ensured good outcomes were still being provided to customers by a third-party service provider.

Some reports didn't segment customers and grouped all nonvulnerable customers together, missing insights from age groups, digital adoption rates, or regional trends.

Vulnerability was treated as a catchall term without detail on how specific needs of vulnerable customers were being met.

One firm said vulnerable customers were being well served, yet the data showed over half of those customers weren't getting good outcomes.

That kind of gap is exactly what the FCA is trying to eliminate. A lack of board challenge.

Reports often lacked evidence that board members questioned assumptions. The better ones documented requests for deeper insight into MI, especially where outcomes appeared marginal. Some boards just approved the report without documented questions, feedback, or follow-up. And action planning.

Some reports outlined problems, but gave no answers, timelines, or plans to track resolution or measurable KPIs.

So let's look at monitoring customer outcomes. The FCA framework is at the heart of and is critical for duties of compliance. Firms need to track whether products and services do what they think they do and what they should.

The report should explain the monitoring that has been carried out and show what you're measuring. So are your customers getting the right outcomes? Are some groups worse off than others?

Why the monitoring matters? How you know of an outcome is good or poor? Explain. And what you do when things go wrong? The good reports show clear data like complaints trends, call wait times, or how customers respond to new tools and product related explanations.

Boards benefit from context. Data on its own doesn't always show whether you're complying. The explanation matters.

Multilayered data sources can be useful, including financial metrics such as charges, refunds, cancellations, operational metrics, such as call wait times and complaint resolution times, outcome measures, so the net benefit to customer, such as the competitiveness of the cost versus utilization of the product and service, and feedback from employees and third parties.

It can be really useful to collect both qualitative and quantitative data, perhaps looking at complaints trends tied to specific process changes, false outcomes benchmarked against your internal complaints data, abandonment rates linked to customer service capacity, root cause analysis linked to product exits or customer churn.

It could be helpful to document how data thresholds were developed. For instance, setting refund thresholds for certain products based on historical complaint levels, peer benchmarking, and customer feedback trends, and explaining that clearly. That sort of thing helps with justifying your MI use.

Some of our clients have even had a dry rub or simulation of board scrutiny with internal audit or another critical friend, a trusted adviser to assess how confidently the data and the MI could stand up to challenge.

These types of practices can be really helpful.

So the FCA also expects firms to show in the board reports how they're supporting vulnerable customers. The FCA expects firms to identify and respond to customer needs, and these needs could relate to any of disability, accessibility, financial hardship, language barriers, and life events such as bereavement or divorce.

And some examples of good practice include creating multiple channels for customers to disclose their needs easily. It could be a mixture of contact and noncontact methods such as online or through apps, as well as through contact call centres and proactive detection of income shocks, tailored support for customers with disabilities and training staff to spot the signs and act on them, the use of Texas, and various other models similar models to help aid those conversations linking to identifying vulnerability.

In practice, firms will need to sample cases to check whether vulnerable customers have received suitable outcomes. And in terms of the governance and oversight needed, the board's role isn't just to receive a consumer duty report.

The report should demonstrate that the board engaged actively. They need to challenge and to guide.

Examples of good governance we've seen include minutes showing board members asking for more data or further analysis, clear ownership of actions, and minutes showing discussion and trackers to evidence follow-up.

Yeah. Some firms use trackers to show how the board has influenced outcomes during the year. That can help show real engagement.

Board impact trackers can be used to show board feedback by quarter, the actions taken based on that challenge, and the escalation of unresolved risks. That level of transparency can certainly help with providing a good degree of confidence for the firm and for the regulator.

We've seen that it's best to avoid, where possible, vague language like broadly positive or appears fair. Evidence of critical thinking, not passive endorsement, is much better.

So what can smaller firms do?

The FCA expects all firms to meet the duty, but it recognizes that smaller firms have fewer resources. It's about proportionality, but not minimalism, and doing what makes sense for your firm.

So some of the practical ways smaller firms can to deliver include being flexible, removing unnecessary steps and information requests for customers, and making the most of the data that you already have, using case studies and customer feedback and satisfaction scores instead of complex MI. Analysing your complaints including the false ones looking for patterns and outcomes asking staff for their experiences ask them to feedback honestly And also bringing in a critical friend to offer an outside view, perhaps a non exec or a trusted adviser to challenge your thinking and review the report before it goes to the board.

So looking ahead, the duty board report isn't just about documenting the past. It's also about your firm's future.

The board should assess if the future business strategy supports the duty.

You may want to look at and show in the report where strategic plans have been updated to reflect duty outcomes, training data, and employee objectives and incentives tied to providing good customer outcomes using scorecards and cultural KPIs in leadership performance reviews, changes to committee structures, mapping governance directly to the four duty outcomes, products, price, understanding, and support, to track outcomes and make sure every risk was owned.

So before finalising and signing off your board report, you could consider and check.

Do we clearly explain what good outcomes look like? Is our data meaningful and used well? Do we draw evidence-based conclusions from it? Have we analysed our distribution chain? Have we acted on poor outcomes?

Did the board provide challenge and shape the report? Are our action plans specific, measurable, time bound, and owned? Can we show improvement over time? And be ready. The FCA can ask for your report at any time.

It should demonstrate not only compliance, but care and clarity too. So wrapping up, the duty board report can be viewed as more than a regulatory requirement. It could be a tool to drive better business and build trust with both customers and with regulators.

Agreed. And producing a good duty board report can be a learning tool, a challenge document, and a road map. Done right, it can be used to build better business and stronger governance.

So we hope you found our conversation useful. And if you have any questions, please reach out to us. Thanks for listening.