The FCA’s latest Multi-firm Review of Consumer Duty price and value practices for unit-linked pensions and savings sends a clear message: legacy products remain firmly in the regulatory spotlight.
The FCA identified significant concerns where customers remain invested in older products with higher charges, more complex fee structures, and poorer outcomes than those available in newer propositions.
A few key highlights:
• Legacy books require ongoing attention. Historic charging structures and product designs should be regularly reviewed and challenged against Consumer Duty expectations.
• Data quality matters. Firms need reliable, accessible data to evidence fair value and understand outcomes across different customer groups. This was not always consistently demonstrated
• Simplification can improve value. The FCA highlighted reducing unnecessary complexity, lowering charges, and rationalising products and funds as examples of good practice.
It is the final point that I found to be one of the most interesting takeaways. The FCA made some pointed statements around how simplified propositions can provide greater operational efficiencies, as well as the impact of having simpler product and fund ranges held on modern IT systems can have on the quality of value assessments. This point is not just about complying with rules – this is using Consumer duty to directly challenge a firm’s product mix and strategy.
The FCA also acknowledged some of the challenges faced by firms to providing improved outcomes and provided guidance to firms. One particular point acknowledged is how firms are cautious about making changes to customer’s products due to concerns about how this might be considered by FOS in the event of a complaint.
Although the FCA highlights the greater collaboration between them and FOS and the fact that a change made in good faith to improve outcomes would be viewed positively, it still feels there is an uncertainty that exists here. There is clearly more work to be done before firms truly feel that confidence to make such changes.
The message is clear - it is about having the governance, data and practical plans to demonstrate that products continue to deliver fair value—and addressing barriers to improvement where they exist.