FCA publishes findings of consumer understanding review

The findings of the review provide examples of best practice which the FCA has shared, as well as identifying areas for improvement. The FCA also clearly sets out its expectations of firms. The good and poor practice examples in the report are relevant to all regulated firms that provide products or services to retail customers, including those which design, manufacture, distribute or support products and services. The findings are also relevant to firms whose communications or customer journeys affect how customers understand information and make decisions.

The duty to deliver good outcomes for retail customers requires firms to act in good faith, avoid foreseeable harm to retail customers and to enable and support retail customers pursue their financial objectives. In addition to these cross-cutting obligations in the duty are the outcomes rules in respect of products and services; price and value; consumer understanding; and consumer support.

Following the duty’s enactment and its focus on “an outcomes-focused, rather than a prescriptive approach”, the regulator decided to conduct a review of how effectively firms were helping consumers understand their products and services. It surveyed 38 firms of various sizes and in various sectors in September 2025 across five main areas: management information (MI) and testing; innovation and communication design; vulnerability and accessibility; financial promotions; and governance and oversight.

The review explores how some firms are using insights gained from a range of sources to identify areas where customers are struggling, to drive improvements in consumers’ understanding. Good practice the FCA identified here included where firms scanned evidence from multiple sources for insights into consumers’ understanding and made improvements, before re-testing to validate that their changes work. Potential sources for this data included calls; complaints; chat transcripts; drop-off data where customers start but do not complete processes; and surveys.

Other examples of good practice included firms testing communications before and after changes were made, to understand whether the changes improved customers’ understanding; and acting, if necessary, on the results. The FCA emphasised the importance of plain language and clear structure for communications as effective approaches to improve understanding, with a visual hierarchy and layered content, and for customer journeys to be well designed. Here the FCA identified as examples of good practice where firms tested tools such as videos and calculators as part of customer journeys with users, to see if these helped customers understand the information more effectively. 

Jo Owens of Pinsent Masons said financial firms of all sizes should review the FCA's findings to see how they apply to their own business. “The FCA’s comments specifically aimed at smaller firms show how the regulator is taking a proportionate approach based on a firm's business, size and resources,” she said. “For example, it highlights as an example of good practice testing consumer understanding of communications with a small group of customers – in this example, 3-5 with particular characteristics. In another example the FCA cited a sole senior compliance lead owning consumer understanding work, giving the business a single and clear point of contact and accountability. These examples show how smaller firms can meet their regulatory obligations by being thoughtful about their available resources and actual customer base, without the need for complex processes or large teams.”

For communications, the FCA called out clarity of language and structuring as good practices to aid consumer understanding and said that firms need to take particular care in how they communicate with vulnerable customers given their varying needs, digital confidence and accessibility. Embedding approaches to support customers with characteristics of vulnerability into firms’ processes, governance and training and carrying out testing with vulnerable customers, alongside clear ownership of the consumer understanding outcome at the governance level, were other key features the FCA identified.

However, the review also identifies several areas for improvement. These include where there was little evidence of testing or it was not well documented; and where it was unclear why MI was relevant and how it was reviewed to help identify where customers may not understand key information. The FCA said that relying on sales data or a lack of consumer complaints was not sufficient in itself to indicate consumers fully understand information about a product or service.

Financial services regulation expert David Heffron of Pinsent Masons said: “The FCA identified that simplifying information is more than reducing word count, referring in this context to ways of organising information so customers can understand and act, for instance with summaries, signposting and clear definitions”.

“On vulnerability, the FCA referred in its review to research findings of low literacy and numeracy skill levels in adults, and strongly performing firms tailored the design of their communications with such customers in mind and tested the communications with them. Embedding processes in systems to identify vulnerability at key points in the customer journey which is flagged to customer-facing staff to adapt the firm’s communications accordingly, or taking a ‘tell us once’ approach to how to how customers want to be communicated with, were good practices the FCA identified. The FCA also mentioned some firms monitoring outcomes for customers in vulnerable circumstances as a distinct MI category. Takeaways for firms include the need to engage with communication design and testing and to act on consumers’ feedback, with clear ownership at senior management level for the consumer understanding outcome”, he said.

“The FCA was clear that for this outcome effective governance is about bringing the right teams in the business together, rather than there being any particular right way of delivering the consumer understanding outcome.” 

Although the review does not impose any new regulatory obligations on firms, the regulator said it hoped its findings will “help firms learn from each other”; as well as providing insight for them to use to assess and, if needed, adapt their approach to help consumer understanding.

While the FCA’s full requirements for the duty are stated in the FCA handbook and its finalised guidance (121-page / 1.13MB PDF), it said it expects firms to engage with its latest findings along with the other three outcomes and cross-cutting obligations outlined in the duty. This latest review follows earlier publications from the FCA sharing findings for the ‘price and value’ and ‘consumer support’ duty outcomes.