Proving Compliance with Consumer Duty

Alec Wimbleton

by Alec Wimbleton, Compliance and Business Assurance Director

Staying informed and up-to-date with compliance developments is crucial for brokers to serve clients effectively. Initiatives, such as Consumer Duty, are essential for brokers to provide fair value, address vulnerability, and meet regulatory standards. By understanding and adhering to these guidelines, brokers can enhance their service, protect consumers, and navigate the compliance landscape successfully.

Fair Value

For Brokers, ensuring fair value is vital under the new Consumer Duty framework. “Price and value” require firms to conduct fair value assessments, determining if consumer prices align reasonably with expected benefits.

But how can brokers demonstrate fair value?

The FCA emphasises clear and equitable charges for the work performed, regardless of fees being acceptable. Appointed Representatives (AR) may face fee and commission limitations. Their Networks often research lender and packager fees to ensure fairness. Directly Authorised brokers have less support. Engaging a consultant or oversight compliance firm can demonstrate a fee review has been undertaken. In the absence of either, brokers need alternative evidence to demonstrate fair fee structures.

Brokers must show the FCA they offer fair value, requiring a deep understanding of the local market and maintaining consistent fees. Lenders in the specialist market log packager and broker fees, generating league tables for fair value comparisons. Brokers must aim to avoid ranking high on, or being removed from, lender lists due to charging higher fees. Fixed fees may be beneficial, while percentage fees are becoming harder to justify.

The Consumer Duty allows brokers to showcase professionalism, recording research and rationale for recommendations that are made. Consistency and justification for higher fees are crucial. Documentation of additional work and upfront fees based on research are important. Consumers pay for professional services so, so make sure your records accurately show what you are charging and why on a case-by-case basis, and a product-by-product basis.


Consumer Duty guidance highlights the obligation for firms to prioritise positive outcomes for all customers, particularly those in vulnerable situations who may face financial challenges. Firms must provide evidence of additional support offered to vulnerable customers and demonstrate their understanding of vulnerability, emphasising the importance of early identification.

Lenders are now incorporating questions in their systems to identify vulnerable consumers, especially among specialist lenders whose target market may exhibit higher vulnerability levels compared to mainstream lenders.

Advisers operating under network oversight have likely received guidance on documenting and fulfilling Consumer Duty requirements. Other advisers may benefit from direction in this regard. Here are some key considerations:

To identify and record vulnerability, it is crucial to assess whether clients exhibit any of the four main drivers:

• Health-related factors

• Resilience to financial and emotional shocks

• Capability to understand or communicate, including digital literacy

• Negative life events

While identifying clear disabilities such as blindness or deafness is relatively straightforward, recognising less apparent vulnerabilities arising from age-related conditions or learning disabilities requires appropriate questioning techniques.

Temporary vulnerability, which can affect individuals at any time, is particularly challenging to define and identify. It encompasses various personal circumstances like debt problems, bereavement, or emotional instability.

Temporary vulnerability can impact anyone across different life stages. Failing to recognise and address temporary vulnerability can unintentionally worsen a customer’s situation rather than achieving positive outcomes.

To determine temporary vulnerability, advisers can start by understanding clients’ motivations for seeking financial assistance. For instance, in the case of downsizing, delving into the reasons behind the decision can provide valuable insights. Distinguishing between wants (such as becoming empty nesters) and needs (such as mobility issues requiring wheelchair-accessible accommodations) is essential.

Clients with genuine borrowing needs are more likely to fall into the vulnerable category. By asking additional rapport-building questions, advisers can identify vulnerable customers, offer them tailored support, and document these interactions appropriately.

Identifying vulnerable customers can be challenging and may require different approaches depending on the nature of customer interactions. While face-to-face meetings allow for observation of body language cues, telephone-only cases necessitate more open-ended questions and concept checking.

Accurate Management Information is vital for advisers, as networks, the FCA, and lenders increasingly expect comprehensive reporting on customer vulnerabilities. Declaring no customers with any vulnerability elements may raise doubts and further investigations, underscoring the need to provide transparent and detailed information.

As lenders request information on customer vulnerabilities, it is essential to inform customers about these information requests and highlight the potential additional support lenders can make available. Remember to maintain clear documentation of customer consent regarding this sharing of personal and potentially sensitive data.

If you would like to know more about the FCA’s Consumer Duty Guidelines, please CLICK HERE.