The Financial Conduct Authority’s (FCA) Consumer Duty sets a higher bar for the way financial services firms design, distribute, and monitor their offerings. Among its four outcomes, the Products and Services Outcome is fundamental. If products and services are not designed and distributed properly, the other outcomes—price and value, consumer understanding, and consumer support—cannot succeed.
This article explains the requirements of the Products and Services Outcome, its practical implications for firms, and how compliance professionals can support their businesses in embedding it effectively.
1. The Consumer Duty in Context
The FCA introduced the Consumer Duty to address concerns that retail customers were too often left with products they did not understand, did not need, or that provided poor long-term value.
The Duty applies across the product lifecycle, setting a clear expectation that firms must act to deliver “good outcomes” for retail customers.
The Products and Services Outcome requires that:
- Products and services are designed to meet the needs, characteristics, and objectives of a defined target market.
- Distribution strategies are appropriate for that target market.
- Firms monitor and review products and services to ensure they continue to meet customer needs.
In short: firms must design with intent, distribute with discipline, and monitor with rigour.
2. What the FCA Expects
The FCA has set out its expectations in FG22/5 (Final non-Handbook Guidance for firms on the Consumer Duty). For the Products and Services Outcome, the regulator’s expectations can be grouped into three areas.
a) Product and Service Design
Firms must demonstrate that products and services are:
- Built around customer needs. This means defining the needs, objectives, and characteristics of the intended customer base before development begins.
- Appropriate in features. Products should not contain unnecessary complexity or features that are unlikely to benefit the target market.
- Fair in foreseeable risks. Firms must identify and mitigate risks of harm, particularly for vulnerable customers.
b) Target Market and Distribution
The FCA is clear: “one-size-fits-all” is no longer acceptable.
- Firms must define a target market with enough detail to ensure the product will genuinely meet their needs.
- Distribution arrangements should ensure the product is sold only to that market, and that distributors understand both the product and its intended audience.
- Monitoring is required to identify sales outside the target market and take remedial action.
c) Ongoing Review
Products and services are not “set and forget.”
- Firms must review products throughout their lifecycle, checking whether they remain fit for purpose as markets, customer circumstances, and regulatory expectations evolve.
- Data and MI (management information) are central—complaints, lapse rates, claims ratios, and distributor feedback all help assess whether outcomes are being met.
3. Why This Matters
The FCA sees poor product governance as a root cause of consumer harm. Mis-selling scandals, unsuitable investment products, and complex insurance policies all illustrate how weak oversight can damage customers and the reputation of the sector.
The Products and Services Outcome is designed to prevent these failings by forcing firms to ask fundamental questions:
- Who is this product for?
- How will it meet their needs?
- How do we know it continues to work for them?
The result should be products that are simpler, clearer, and more effective at delivering value—while also reducing regulatory risk for firms.
4. Practical Implications for Firms
For compliance and risk professionals, the Products and Services Outcome raises several practical challenges.
a) Defining Target Markets
Firms need to segment their customers more precisely. For example:
- An investment ISA aimed at first-time investors in their 20s will have different features and risks than one designed for retirees seeking stable income.
- A general insurance policy designed for low-risk drivers should not be marketed in the same way as one intended for commercial fleets.
Target market statements must be evidence-based, not generic.
b) Product Approval and Governance
Most firms already follow the FCA’s Product Intervention and Product Governance Sourcebook (PROD), especially manufacturers of MiFID II products. The Consumer Duty goes further:
- Approval processes must explicitly consider customer outcomes.
- Governance committees need a clear line of sight to data on product performance, customer complaints, and potential harms.
- Decisions must be documented, showing how customer interests were weighed against commercial drivers.
c) Distributor Oversight
Manufacturers remain responsible for ensuring distributors understand and sell to the right market. This requires:
- Clear product information for distributors, including target market details, product features, and potential risks.
- Training and support for advisers, brokers, or intermediaries.
- Monitoring sales data and taking corrective action if distribution goes off track.
d) Monitoring and MI
The FCA expects firms to use data intelligently. Key metrics might include:
- Sales outside target markets.
- Complaints and claims trends.
- Customer satisfaction and feedback.
- Evidence of customer vulnerability being properly addressed.
Firms must not only collect data but also demonstrate how they act on it.
5. Challenges in Implementation
While the principles are clear, embedding them can be difficult.
a) Legacy Products
Many firms have large back books of products designed before the Duty. The FCA expects these to be reviewed. If products cannot be adapted to meet customer needs, firms must consider withdrawal or remediation strategies.
b) Balancing Commercial and Customer Interests
The Duty does not prevent firms from making profits, but it does require them to demonstrate that customer interests are central. Compliance teams may need to challenge product features that generate revenue but deliver little value.
c) Data Gaps
Not all firms have the systems to capture detailed product and customer data. Investments in MI, data governance, and reporting will often be necessary.
d) Vulnerable Customers
The FCA places particular emphasis on vulnerability. Firms must show how they have identified and mitigated risks for customers with characteristics of vulnerability—whether financial capability, health, or life circumstances.
6. The Role of Compliance Professionals
Compliance teams are central to embedding the Products and Services Outcome. Key responsibilities include:
- Advising on product governance frameworks. Ensuring approval processes incorporate Consumer Duty considerations.
- Challenging target market definitions. Testing whether they are clear, evidence-based, and realistic.
- Reviewing monitoring arrangements. Checking whether data collection is sufficient to identify risks and harms.
- Training business teams. Helping product, marketing, and distribution colleagues understand what the Duty requires.
- Documenting decisions. Ensuring there is an audit trail showing how outcomes were considered.
By taking a proactive, collaborative approach, compliance professionals can help firms turn regulatory obligations into opportunities for building trust.
7. Opportunities for Firms
While the Duty raises standards, it also creates opportunities.
- Competitive differentiation. Firms that design genuinely customer-centric products can build stronger reputations and customer loyalty.
- Reduced remediation costs. Better governance lowers the risk of mis-selling and costly redress exercises.
- Cultural alignment. Embedding the Duty supports broader goals of fairness, integrity, and ESG commitments.
In this sense, the Products and Services Outcome is not just a compliance obligation—it can be part of a firm’s value proposition.
8. What Good Looks Like
The FCA will be monitoring how firms meet the Duty. Based on its guidance and supervisory communications, good practice includes:
- Clear, specific, and evidenced target market definitions.
- Product governance committees with senior accountability.
- Distribution oversight arrangements with real bite, not box-ticking.
- MI that goes beyond financials to include customer outcomes.
- A willingness to withdraw or adapt products that do not deliver good outcomes.
9. Preparing for Supervisory Scrutiny
The FCA has said it will use the Duty as a “lens” for all its supervisory activity. That means any product review, thematic work, or enforcement case may test how well a firm has embedded the Products and Services Outcome.
Firms should be ready to evidence:
- How products were designed with customer needs in mind.
- How target markets were defined and communicated.
- How distributors were supported and monitored.
- How product performance is reviewed and adapted.
The regulator will expect to see both documentation and evidence of outcomes in practice.
Conclusion
The Products and Services Outcome is the cornerstone of the FCA’s Consumer Duty. It requires firms to design with purpose, distribute responsibly, and monitor relentlessly.
For compliance professionals, it means working closely with product, marketing, and distribution colleagues to ensure governance frameworks are robust, data-driven, and focused on outcomes.
Firms that embrace the Duty not only reduce regulatory risk but also strengthen their customer relationships. In an industry where trust is fragile, that is a competitive advantage worth pursuing.