Consumer Duty three years on: How to reduce compliance costs without increasing regulatory risk

The FCA's latest Enforcement Watch newsletter sends a clear message: the implementation phase of Consumer Duty is over. 

Three years ago, firms invested heavily in policies, governance frameworks, Board reporting and implementation programmes. Today, the FCA is asking a different question: 

Can you prove your customers are receiving good outcomes? 

For many firms, that shift presents both a challenge and an opportunity. 

The challenge is obvious. Firms that cannot evidence good customer outcomes face increasing supervisory scrutiny, skilled person reviews and, in some cases, enforcement action. 

The opportunity is less widely recognised. 

Many firms are spending more time, resource and money on Consumer Duty than they need to because their compliance frameworks generate activity rather than insight. More reports, more committees and more governance do not necessarily produce better customer outcomes or satisfy the FCA. 

The firms that are reducing compliance costs are those that have moved beyond documentation and are using targeted monitoring, meaningful management information and outcomes testing to identify risk earlier and evidence compliance more efficiently. 

The FCA is looking for evidence, not paperwork 

Enforcement Watch 2 reports that the FCA currently has eleven open Consumer Duty investigations across sectors including insurance, pensions, wealth management and consumer investments. 

More importantly, the regulator carried out 382 supervisory interventions during the last financial year, while approximately 30 skilled person reviews referenced Consumer Duty. 

These figures demonstrate that Consumer Duty is no longer simply a supervisory exercise. It is increasingly becoming part of the FCA's wider enforcement strategy. 

The common theme running through the publication is evidence. 

The FCA wants firms to demonstrate that they understand the outcomes their products deliver throughout the customer journey, not simply that they have documented policies explaining how they intend to achieve them. 

Compliance doesn't have to become more expensive 

One of the unintended consequences of Consumer Duty has been the significant increase in governance activity across many firms. 

Additional committees. 

More Board papers. 

More management information. 

More reviews. 

More documentation. 

While each may have been introduced with good intentions, they often increase operational cost without materially improving a firm's ability to identify customer harm. 

In our experience, the firms best prepared for FCA scrutiny are rarely those producing the greatest volume of documentation. They are the firms whose monitoring is focused, risk-based and capable of demonstrating outcomes quickly. 

Done well, Consumer Duty should reduce unnecessary compliance effort by providing clearer evidence of where risks exist and, equally importantly, where they do not. 

Five questions every Board should ask 

Rather than asking whether your Consumer Duty framework is complete, Boards should ask: 

• Can we evidence good customer outcomes across the customer lifecycle? 

• Does our management information identify emerging customer harm early enough to take action? 

• Are we monitoring the right indicators, or simply producing more reports? 

• Could we demonstrate fair value using evidence rather than narrative? 

• If the FCA requested evidence tomorrow, could we provide it quickly and confidently? 

If the answer to any of these questions is uncertain, additional documentation is unlikely to solve the problem. Better evidence will. 

Reducing regulatory risk while reducing compliance burden 

The firms likely to perform best under increasing FCA scrutiny will not necessarily spend the most on Consumer Duty. 

They will spend more intelligently. 

That means simplifying governance, focusing management information on customer outcomes, strengthening evidence where it matters most and removing compliance activity that adds little regulatory value. 

A well-designed Consumer Duty framework should help firms make better decisions with less effort, not create an ever-growing administrative burden. 

How Avyse Partners can help 

We work with firms to streamline Consumer Duty compliance while strengthening the evidence the FCA expects to see. 

Whether you are reviewing your Consumer Duty framework, preparing for supervisory engagement or looking to reduce ongoing compliance costs, we help firms identify where effort can be reduced, where evidence needs to improve and how governance can be made more effective. 

The objective is simple: reduce compliance burden, improve customer outcome evidence and stay ahead of regulatory scrutiny. 

If you'd like to discuss how your Consumer Duty framework could become both more efficient and more resilient, we'd be pleased to arrange an initial conversation.