Pension and financial services firms have improved how they monitor and report customer outcomes under the Consumer Duty, but many still need to strengthen their outcome monitoring, governance and oversight, according to the Financial Conduct Authority (FCA).

Under the duty, firms must produce an annual board report setting out what their monitoring has revealed about customer outcomes when they buy financial products, and what actions they will take as a result.

FCA head of consumer policy, Jonathan Pearson, wrote in a blog that good reports are now helping boards turn governance into “real change and better outcomes for consumers”, with clearer evidence, stronger challenge and faster action when customers may be at risk of harm.

He said that with the third cycle of Consumer Duty board reporting on the horizon, “now is a good moment to pause and reflect on what we’ve learned from year two”.

The good news is "the duty is making a difference", according to Pearson, but some areas need more attention to ensure reporting is genuinely outcome‑focused.

The regulator has seen evidence of stronger governance and clearer board oversight, better action planning and ownership, and broader and more insightful data.

While the year two reports revealed progress, the FCA still found that the quality and depth of analysis were variable.

Pearson recommended that firms should focus on clearly linking data to customer outcomes, monitoring outcomes delivered by third parties, evidencing meaningful board challenge, and deepening assessment of consumer understanding and support.

“Both first and second year reports highlighted strong examples of effective practice across the market, including from smaller firms. This shows that it’s possible for all firms to monitor customer outcomes meaningfully and align their strategies with the duty,” he commented.

Looking ahead, Pearson said the improvements have shown that firms continue to move in the right direction, and they should draw on these insights as they approach their third-year submissions.

“Firms should continue strengthening their outcome monitoring, governance and distribution oversight so that the duty continues to deliver good outcomes for consumers,” he added.

“We will continue to support the industry by sharing examples of good and poor practice, including providing extra insights to help smaller firms apply the duty.”

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