Latest FCA Enforcement Watch: key challenges for asset and wealth managers on Consumer Duty

The publication is particularly relevant to asset and wealth managers because it includes interventions involving wealth management firms and a fund manager, as well as an open investigation into a wealth management firm concerning financial promotions, high fees and the quality of its engagement with the FCA. 

Nearly three years after introducing the Consumer Duty, the FCA reported 11 open investigations examining possible breaches. It also stated that approximately 30 skilled person reviews commissioned since the Duty was introduced have referenced it. These figures indicate that Consumer Duty compliance is being considered through both supervisory and enforcement mechanisms. 

In the first of our three-part series on the FCA's latest Enforcement Watch publication, we examine the regulator's focus on fair value and the treatment of vulnerable customers under the Consumer Duty framework.  

Fair value: more than just price 

The regulator continues to emphasise that value is not determined by price alone. Products and services that fail to meet customer needs, create foreseeable harm or deliver little meaningful benefit are unlikely to represent fair value, regardless of cost. 

Recent FCA investigations have focused on whether customers received benefits proportionate to the fees charged. This includes scrutiny of a wealth management firm where concerns were raised over high fees and whether clients may have paid more than was reasonable for the service received. The FCA also highlighted a fund manager that was unable to demonstrate fair value or effectively monitor customer outcomes, leading to significant restrictions on its business before it ultimately entered liquidation. 

What are the key considerations for firms? 

• Clearly articulate the benefits customers receive. 
• Assess whether total charges are proportionate to those benefits. 
• Ensure products and services meet the needs of the target market. 
• Identify features that provide limited customer value. 
• Evidence ongoing monitoring of customer outcomes. 

The FCA's message is clear: firms must be able to demonstrate, with evidence, that customers are receiving fair value rather than relying on assessments that are merely procedural. 

Vulnerable customers under increased scrutiny 

The FCA continues to place significant emphasis on the treatment of vulnerable customers (an individual who has a higher risk of harm). In the wealth management investigation referenced above, the regulator is examining whether customers with characteristics of vulnerability experienced heightened or foreseeable harm. 

The publication also describes regulatory intervention at another wealth management firm where concerns included the adequacy of support provided to vulnerable clients. Following FCA involvement, the firm restructured its operations and reduced exposure to higher-risk business activities. 

What are the key considerations for firms? 

• Identify vulnerability throughout the customer journey. 
• Assess whether vulnerable customers experience different outcomes. 
• Incorporate vulnerability into product, service and value reviews. 
• Ensure communications and support are tailored to customer needs. 
• Monitor and address areas of foreseeable harm. 

Importantly, firms should move beyond simply recording vulnerability data. They must be able to demonstrate how this information influences decision-making, customer support and outcomes monitoring. 

Key implications for asset and wealth managers 

The FCA’s recent enforcement activity demonstrates that compliance with the Consumer Duty must be evidenced through tangible customer outcomes, rather than procedures alone. For asset and wealth managers, particular attention should be given to whether fees are proportionate to the benefits delivered and whether vulnerable customers receive appropriate and tailored support. 

Firms should critically assess the quality of their evidence, the effectiveness of ongoing outcomes monitoring and how identified concerns influence decision-making. Where weaknesses are found, prompt and demonstrable action will be essential. The clear message is that firms must be able to show not only that appropriate frameworks are in place, but that they are operating effectively and delivering fair outcomes in practice. 

References 

[1] https://www.fca.org.uk/publications/newsletters/enforcement-watch-2