The FCA has published a review outlining good practice and areas for improvement in firms’ approaches to products and services.
Design and target market
Good practice in this area included:
- Mapping customer needs to product service and design. Some firms used a ‘negative target market’ to identify customers for whom the product or service would not be appropriate;
- Testing target market compatibility – many firms used customer impact assessments to confirm that the final product or service was compatible with the target market; and
- Adapting products or services and customer journeys for different customer segments.
Areas for improvement included:
- Insufficient granularity – some firms gave simplistic and generic target market explanations; and
- Lack of focus on identifying customers in vulnerable circumstances.
Testing, monitoring and review
Good practice in this area included:
- Outcome-focused and customer centric management information; and
- Taking action in response to identified issues.
Areas for improvement included:
- Monitoring limitations – some firms appeared not to use MI to trigger targeted, risk-driven reviews when potential issues emerged;
- Relying entirely on complaint volumes as an indicator of customer outcomes; and
- Failing to validate the impact of product or service changes.
Distribution and third parties
Good practice in this area included:
- Tailoring distribution strategy to the profile of the target market, often based on accessibility considerations;
- Structured engagement with distributors, including in relation to MI and complaints data;
- For smaller firms, clear data-sharing expectations; and
- Intervening on out-of-target market distribution.
Areas for improvement included:
- Limited evidence justifying distribution strategy; and
- Failing to validate the impact of changes to distribution strategy.