The four outcomes are summarised as:

1. Products and services – that the product or service is fit for purpose.
2. Price and value – that the value of the product or service is fair – that is, fees are not excessive.
3. Consumer understanding – consumers have the necessary information to make informed decisions about their products.
4. Consumer support – consumers can get in contact with customer services, who are responsive and helpful.

However, there are limitations when it comes to the current structure of these outcomes.

Consumer duty has focused on ensuring that consumers who hold a product receive good outcomes for that specific product. It does not go far enough to consider potential customers who are currently discouraged from entering the investment market. Subsequently, more is required from firms.

The industry needs to ensure consumers with the appropriate risk profile are investing in products where the performance and historic volatility align to their objectives.

The industry should be doing more by expanding outcome testing to include these consumers – utilising it to determine whether consumers are choosing the correct product given their levels of risk tolerance.

This will make sure they are receiving good outcomes, not just from the product but also holistically. 

Customer journeys need to be designed in a way to nudge consumers to the right products for their financial objectives.

A/B testing should be used to refine the customer journey, implementing changes that result in a higher proportion of consumers choosing the right product/s for them and hence improved outcomes.

Next steps

Overall, consumers do need to know there is a risk with investing. But without providing the context to this likelihood, they do not get to make the decision themselves and consequently the industry is doing consumers a disservice. 

Therefore, to improve outcomes for consumers we need to ensure the following:

1. Include a disclosure with cash products so people understand that inflation can erode their value over time.
2. Provide further context and comparison of products so consumers are better able to understand the risk and the potential benefits over cash.
3. Ensure the wording used in risk warnings are inclusive and does not create a barrier for specific demographics of consumers to invest.
4. Implement outcome testing for potential investors to continually validate that they are investing in the right products for their risk tolerance.

It has become apparent that consumer duty does not go far enough to get the UK investing.

Therefore, change is required so consumers are provided with the necessary context to make informed decisions.

Consumers should understand the impact of inflation when holding cash and how investing can be used to mitigate this risk. 

This is the type of simplified advice that should be afforded to consumers.

Given that an increase in investing would benefit the wealth industry, UK economy and consumers alike, the FCA and the government should be doing more to encourage growth.

The hesitation from the FCA has been that change to risk warnings could increase harm to consumers, but inaction also yields the same outcome.

Mike Penny is a consultant at Simplify Consulting