UK: Consumer Duty - FCA products and services review: what asset management firms must do

Why should I read this?

On 10 July 2026, the FCA published the findings of its review into firms' approaches to products and services “Products and services: good practice and areas for improvement”. This sets out the FCA’s findings from a qualitative survey of financial services firms spanning banking, insurance, payments and e-money, asset management, consumer investments, funeral plans and consumer finance. In this briefing we draw out points for asset managers.

The report covers product and service design, target market definition, monitoring and review, distribution and third parties, and customers in vulnerable circumstances. It does not create new regulatory requirements. It gives practical examples firms can use to benchmark their own approach against the products and services outcome in the Consumer Duty (the Duty).

The report is directly relevant to fund managers (as product manufacturers defining target markets and designing fund products), fund distributors and platforms (as firms responsible for ensuring products reach the right target market), and any firm that oversees outsourced distribution arrangements. The investment management sector’s jointly developed Distributor Feedback Template (DFT) features as an example of good practice.

What should I do?

• Review your product approval procedures and target market definitions against the FCA’s examples of good practice

Check that your target market descriptions are sufficiently granular and explain why the target market is appropriate given the product’s risk profile. Ensure your testing is adequate.

• Check that your monitoring and management information (MI) framework goes beyond complaint volumes

Use MI to trigger targeted reviews of specific products or customer journeys, not only routine periodic reviews or simply using complaints data. Ensure that you are taking appropriate action on potential harm identified by MI.

• Assess whether you measure the actual impact of changes you make to products or customer journeys

Rather than relying on a general sense that a change is popular.

• Review your distribution strategy

Document clearly why your chosen distribution channels are appropriate for the target market (not just that due diligence was undertaken on distributors). If you are an asset manager, consider adopting or reviewing your use of the DFT. If you make any changes to the distribution strategy, ensure that you measure their impact.

• Consider how you adapt products and services for customers in vulnerable circumstances

The FCA expects firms to explain how they meet those customers’ needs, not just how they identify those customers.

• Monitor the FCA’s separate consultation CP26/23 on the scope and proportionality of the Duty before making major process changes

CP26/23 proposes changes that may affect how the Duty applies to your firm. Firms should take the consultation into account when considering significant changes to their governance arrangements.

What else do I need to know?

Regulatory context

The Duty sets a higher standard for retail consumer protection. The product governance obligations sit in PRIN 2A.3 and Finalised Guidance FG22/5 “Final non-Handbook Guidance for firms on the Consumer Duty” (Chapter 6). Manufacturers must ensure that product and service design meets the needs, characteristics and objectives of customers in the identified target market. They must also make sure their distribution strategy is appropriate and carry out regular reviews.

If a firm’s product is subject to the Product Intervention and Product Governance sourcebook (PROD) rules (for financial instruments and structured deposits under PROD 3, insurance under PROD 4, or funeral plans under PROD 7), the firm must continue to comply with the applicable PROD requirements. PRIN 2A.3 does not apply to that product or service. However, the FCA encourages firms subject to PROD to review the good practice examples and consider whether they could improve their existing product governance arrangements.

The FCA is also consulting on changes to how the Duty applies, in CP26/23 “Consultation on the scope and proportionality of the Duty”. The Duty already applies proportionately based on a firm’s role in the distribution chain. The FCA does not expect all firms to apply the same approach or to oversee other firms in the distribution chain unless other regulation or contracts require this.

What the FCA looked at

In October 2025, the FCA carried out a qualitative survey of 38 firms. The firms included small, medium and large firms with different business models and risk profiles. The FCA focused on four areas:

• product and service design and target market
• testing, monitoring and review over the life of a product or service
• distribution and third parties
• customers in vulnerable circumstances

The FCA analysed supervisory intelligence, board reports and vulnerability reviews. These showed recurring gaps in how firms identify target markets, consider vulnerability and assess whether products meet customer needs.

Product and service design and target market

Manufacturers must operate product approval procedures that specify the target market at a sufficiently granular level, take account of additional or different customer needs, and assess relevant risks (PRIN 2A.3.4R). Manufacturers must also ensure that product design meets the target market’s needs, does not adversely affect groups of retail customers, and avoids foreseeable harm.

Good practice
Many firms researched customer needs, characteristics, objectives and likely behaviour before designing or reviewing products. They built “customer profiles” to map product design against customer needs. One firm built seven customer profiles based on customer behaviour, motivation and service expectations.	Some firms used a “negative target market” to identify customers for whom a product is not suitable.
Many firms used customer impact assessments to test that a finished product matched its target market. This included mapping the customer journey end to end and identifying risks of harm at each stage.	One firm’s vulnerability impact assessment found a product exposed customers to a single large position in an illiquid investment, which made it unsuitable for the target market. The firm redesigned the product.
Many firms made customer journeys more inclusive: · following Web Content Accessibility Guidelines (WCAG) for digital content; · redesigning investor documents for clarity; and · adding voice control and sign language identity verification.	Some larger firms used an “inclusive design panel” involving customers and charities to shape product design. Inclusive design should benefit all customers, not just those in vulnerable circumstances. Panels should be representative and not a tick-box exercise.
Smaller firms with fewer resources for research still made good use of customer data. One smaller firm combined customer feedback and complaints with insight from experienced frontline staff, sharing this directly with senior management.

Areas for improvement
Some firms gave simplistic or generic target market descriptions that did not match the product’s risk profile. They did not explain why the target market was appropriate given the risks involved. Firms must define target markets at an appropriately granular level considering the product’s risk profile (PRIN 2A.3.4R(1)).	Some firms, asked how they adapted products for customers in vulnerable circumstances, focused only on how they identify those customers (for example using “vulnerable customer flags” or referring customers to third parties). They did not explain how they then meet those customers’ needs.

Monitoring and review

Firms must regularly monitor the outcomes customers receive from products manufactured or distributed, communications, and support provided (PRIN 2A.9.8R). Firms must review products regularly to ensure they still meet the target market’s needs (PRIN 2A.3.7R) and take appropriate action if they identify circumstances that may adversely affect customers (PRIN 2A.3.8R).

Good practice
Many firms improved the MI they capture. Almost all captured customer views through complaints, root cause analysis, feedback and query trends. Some built “Voice of the Customer” dashboards.	Many firms monitored customer behaviour trends as indicators of poor outcomes. Examples include low product usage and early cancellations.
Some smaller firms without dedicated outcome-testing teams still combined operational MI with customer outcome data effectively.	Examples of firms acting on monitoring include: · introducing a service level agreement stabilisation process with a service provider after finding complaints caused by processing delays; and · introducing “ready-made investment” products after customer feedback showed customers wanted more help choosing investments.

Areas for improvement
Some firms did not use MI to trigger targeted reviews of specific products or journeys in response to emerging problems. Firms must act in good faith on potential harm shown in their MI.	One smaller firm relied almost entirely on complaint volumes as an outcome indicator, risking limited visibility of issues that have not yet led to complaints. Firms should use judgement to find data sources that give real insight into outcomes.
Several firms made changes to products or journeys but did not properly check whether those changes actually improved customer outcomes.

Distribution and third parties

Manufacturers must ensure their distribution strategy is appropriate for the target market and take reasonable steps to ensure products reach the target market (PRIN 2A.3.4R(5) and (6)). Distributors must maintain, operate and review distribution arrangements to avoid or mitigate foreseeable harm and must verify that products only reach the intended target market (PRIN 2A.3.14R, PRIN 2A.3.19R).

The FCA has published a joint statement with the Information Commissioner’s Office (ICO) on sharing vulnerability-related data across distribution chains. Firms should also look at CP26/23 on the allocation of responsibilities across distribution chains.

The FCA found that some firms had not clearly measured the impact of changes to their distribution strategy and encourages firms to measure and quantify whether interventions improve customer outcomes.

Good practice
Many firms tailored their distribution strategy to different customer needs within the target market. Examples include exempting some vulnerable customers from telephony charges, waiving administration fees for phone-based policy changes, and offering a telephone claims option and replacement voucher instead of requiring an in-person insurance claim for customers with mobility issues.	Some firms adapted distribution based on product complexity.
Many firms built clear structures for engaging with distributors. One firm required a distributor to submit MI to governance forums and provide weekly complaints data.	The investment management sector has jointly developed a Distributor Feedback Template (DFT) to help reporting across distribution chains. This is directly relevant to asset managers and fund distributors.
A smaller firm set clear data-sharing expectations with its distributors, covering what information it needed, the standard it should meet, and how it should be shared.	Firms identified and fixed out-of-target-market distribution. One firm found through distributor feedback that one of its investment funds had been sold to customers outside its target market because some distributors misunderstood the target market description. It fixed this by clarifying its target market and distribution strategy.

Areas for improvement
Many firms gave limited reasons for their choice of distribution strategy. Some treated the strategy as self-explanatory, or explained due diligence on distributors without explaining why the distribution channels used were appropriate for the target market.	Firms are only responsible for their own role and activities in the distribution chain. They are not required to oversee other firms’ compliance unless other regulation or contracts require this.

Next steps

The publication sets out examples of good practice and areas for improvement. It does not introduce new requirements, is not a formal consultation and should not be treated as creating new regulatory obligations. However, it provides a useful indication of the FCA's supervisory expectations and firms should benchmark their product governance arrangements against the examples where relevant.

Separately, firms should monitor CP26/23 (the FCA’s consultation on the scope and proportionality of the Duty). The consultation proposes changes that may affect how the Duty applies to firms, if implemented. Firms should take those proposals into account when considering significant changes to their product governance framework.

How Eversheds Sutherland can help

Eversheds Sutherland can help firms:

• benchmark their Consumer Duty product governance framework against the FCA’s good practice examples;
• review target market definitions, product approval and governance processes;
• strengthen monitoring, MI and product review frameworks;
• assess distribution strategies, review distribution agreements and third-party oversight arrangements;
• advise on the interaction between the Consumer Duty and the PROD rules; and
• assess the implications of CP26/23 for their business