FCA Priorities, Consumer Understanding and the Thin Grey Line

Unknown Speaker

Hello and welcome to the B-Compliant Podcast. I’m Vicky Pearce, and I’m here with Rachel MacRae. Today we’re doing a neat little tour of the FCA’s latest priorities across pensions and mortgages, and then getting into consumer understanding and a couple of higher-risk areas that firms really shouldn’t treat as background noise.

Rachel MacRae

Which is the compliance version of saying, if this is sat in your inbox waiting for a “when I get a minute”, maybe don’t do that.

Unknown Speaker

Exactly. So, starting with pensions, the FCA has published its third Regulatory Priorities Report for that market. It’s aimed at firms involved in pension business, and it’s supposed to be a clear annual one-stop shop for boards and senior management on what the FCA’s going to be looking at over the year ahead.

Rachel MacRae

And the four themes are pretty clear. First, well-run schemes that provide value for money. There’s a strong emphasis on the forthcoming Value for Money framework, and firms are expected to think now about the operational and commercial impact, not wait until it lands and then act surprised.

Unknown Speaker

Yes, that “we’ll deal with it later” face never really works, does it? Then second, effective support for consumers, especially at key decision points like retirement. The FCA points to the Advice Guidance Boundary Review and targeted support, so this is very much about helping consumers make decisions in a way that actually works for them.

Rachel MacRae

Third is growth and innovation, which I think is interesting because it’s not innovation for innovation’s sake. The FCA talks about proportionate investment in private assets where that’s in savers’ best interests, but with proper controls around it. So, not a free for all; it's more of a “yes... but show your working out”.

Unknown Speaker

That’s a good way of putting it. And fourth, modernising pensions and long-term savings. That includes legacy systems, consumer journeys, and confidence in the Sip market. Which, honestly, is a reminder that clunky old systems are not just an operational annoyance; they can become a customer outcome issue.

Rachel MacRae

And underneath all of that sits Consumer Duty. The FCA says it’s integral to how firms should be treating pension consumers. So even where the topic sounds quite strategic or quite operational, the question is still: what outcome is the customer actually getting?

Unknown Speaker

Absolutely. The report also flags ongoing work around operational resilience, third-party oversight, SM&CR, and the responsible use of AI. So firms involved in pension business, both manufacturers and advisers, really do need to review it carefully and think about how it applies to their own model.

Rachel MacRae

Then if we flip over to mortgages and home finance, the FCA’s fifth Regulatory Priorities Report does something very similar for that sector. The big theme here is good consumer outcomes in a changing market, and again, Consumer Duty is running right through it.

Unknown Speaker

Yes, and a central point is the Mortgage Rule Review. The FCA wants to simplify rules to support innovation, broaden access to mortgages, particularly for first-time buyers and underserved consumers, enhance later life lending, and protect vulnerable customers. But the really important bit is that even if some changes are permissive, firms still have to set appropriate risk appetites and own the outcomes.

Rachel MacRae

That’s the bit people can be tempted to glide past. “The rules let us” is not the same as “the outcome is good”. And the FCA is also very focused on responsible lending and customers in financial difficulty. Affordability assessments are expected to stay under review, especially if access to lending is being widened.

Unknown Speaker

And there’s specific attention on second charge mortgages, which we’ll come back to, but also broader expectations around supporting customers through financial stress, including appropriate forbearance. So it’s not only about getting people into lending; it’s about how they’re treated when things get difficult.

Rachel MacRae

Advice quality is another priority. The FCA wants advice to be demonstrably suitable, especially where customers are consolidating debt or borrowing into later life. And record-keeping and quality assurance come through strongly, because if you can’t evidence what you did and why, you’re in a weak position very quickly.

Unknown Speaker

Then layered on top of that, there are the wider focus areas: operational resilience, financial crime, conflicts of interest like conditional selling, oversight of appointed representatives, SM&CR developments, and AI. So for both pensions and mortgages, the message is pretty consistent really.

Rachel MacRae

Yes: don’t treat these reports as a nice summary for a board pack and then move on. They’re telling you where the FCA’s attention is going, and Consumer Duty is the thread that ties the lot together. Whether it’s product design, advice, systems, governance, or support, firms need to be able to show they’ve thought ahead and can evidence good outcomes.

Rachel MacRae

Right, onto Consumer Duty and consumer understanding, and I do think this is one of those areas where the FCA is trying very hard to say, politely, stop assuming customers understand what you’ve sent them just because it made sense internally.

Unknown Speaker

Yes. The FCA’s review findings are very clear: firms must help customers make effective, timely, and properly informed decisions by giving information that is fair, clear, and not misleading, at the right time, in a way customers can genuinely understand. And crucially, this is outcomes-focused.

Rachel MacRae

So there is flexibility in how firms do it, but not flexibility on whether they need evidence. That’s the really important distinction. The review applies to all regulated firms serving retail customers, regardless of size. Smaller firms can take a proportionate approach, but proportionate does not mean vague and hopeful.

Unknown Speaker

Quite. One of the biggest themes in the review is using meaningful insight and testing, rather than assumptions. Good practice included analysing call listening, complaints, chat transcripts, website analytics, and drop-off data, then actually using that evidence to make improvements.

Rachel MacRae

And the FCA is pretty direct that relying on sales data, or the absence of complaints alone, is not enough. Which makes sense, really. A customer not complaining does not automatically mean they understood the communication. It may just mean they gave up quietly, which is not exactly the gold standard.

Unknown Speaker

Not quite the KPI you want. Firms should be able to show what insight they collect, why it matters, how it’s reviewed, and what action follows. That action piece matters. MI that just sits in a dashboard looking impressive is not doing much for anyone.

Rachel MacRae

The FCA also highlights communication design. Good practice included plain language, strong visual hierarchy, summaries, and layering of information so key points come through clearly. And I liked the point that simplification isn’t just chopping words out. It’s also about structuring information so customers can understand and act on what matters.

Unknown Speaker

Yes, because some firms hear “simplify” and think, right, let’s make it shorter, even if it becomes less useful. That’s... not the brief. The review also noted that tools like calculators, videos, walkthroughs, prompts, and FAQs can work well where they’re properly tested and shown to improve comprehension, rather than just adding another layer of clutter.

Rachel MacRae

And vulnerability and accessibility run strongly through the findings. The FCA expects firms to design communications with lower financial capability, low digital confidence, and other vulnerability characteristics in mind. Good practice included proactive identification, tailored support, tell-us-once systems for accessibility needs, and testing with vulnerable cohorts.

Unknown Speaker

Areas for improvement included reactive approaches, limited alternative formats, and weak evidence on whether changes actually improved outcomes for those customers. So again, it comes back to proof, not good intentions.

Rachel MacRae

Financial promotions are in scope too. The FCA saw good practice where messaging was clear and balanced, risks were prominent, formats were accessible, and firms tested understanding. It remains concerned where promotions over-emphasise benefits, hide risks, or rely only on compliance sign-off without customer testing or outcome monitoring.

Unknown Speaker

And then governance. Firms doing this well had clear senior accountability for consumer understanding, used MI to inform decisions, and embedded the Duty into day-to-day processes. Where governance was weaker, accountability was fuzzy, feedback loops didn’t really work, and MI wasn’t being used meaningfully to drive improvement.

Rachel MacRae

So the practical takeaway is that consumer understanding is not a one-off comms review and a sigh of relief. It’s a structured, evidence-based process. You need testing, monitoring, governance, and action. If you’re not challenging your own assumptions about what customers understand, the FCA probably will.

Unknown Speaker

And frankly, firms should use these findings to pressure-test themselves now. What insight are we using? How are we treating vulnerable customers? Who owns this? What do we change when the evidence tells us something isn’t working? Those are the questions.

Unknown Speaker

Let’s finish with two areas where the practical boundaries really matter. First, second charge mortgages. The FCA’s review of intermediaries and lenders in this market found some good practice, but also some areas where poor practice could lead to harm, especially because these customers often have higher levels of debt and may be more vulnerable.

Rachel MacRae

And it is a small part of the overall mortgage market, so it won’t apply to most firms, but if you do advise on second charge mortgages or you’re involved with them, it’s worth paying attention. The key themes were advice quality where debt consolidation is involved, the robustness of affordability assessments, how well intermediaries and lenders work together, record-keeping, and intermediary fees.

Unknown Speaker

That combination tells you a lot. The FCA is focused on suitability, fair value, realistic expenditure assessments, transparent fees, and being able to evidence decisions properly. Again, Consumer Duty sits right underneath all of it. So firms in that space should be checking whether any of the issues raised are relevant to their own processes and controls.

Rachel MacRae

Yes, especially because where advice is more complex or customer vulnerability may be more likely, any weakness in records or affordability work can become a much bigger problem. If the file doesn’t clearly show the rationale, the controls, and the customer outcome, you’re exposed.

Unknown Speaker

Now, the second area is the slightly awkward one, and I say that with love, because it’s very easy for well-meaning people to drift into it. This is the “thin grey line” between helping a client understand historic advice and accidentally straying into regulated complaints handling activity.

Rachel MacRae

Ah yes, compliance’s favourite genre: “I was only trying to be helpful.”. Vicky, you've been talking to Money Marketing this week about helping adviser stay aware of this little known boundary.

Unknown Speaker

I have indeed! This happens because the distinction between explaining and encouraging is subtle. You might think you are simply helping a client make sense of what happened previously, but if you nudge them towards a complaint, the regulatory boundary starts to loom large.

Rachel MacRae

Yes, and the moment support shifts into representation, the line has been crossed. So the safe approach is factual communication. There is also a wider issue here too... when advisers criticize other advisers this erodes trust in the entire profession. The industry is working hard to demonstrate value, integrity and long-term consistency, and if every time a client moves to a new firm they receive a list of the previous adviser’s flaws, their confidence drops in all of us.

Unknown Speaker

Sometimes the pressure doesn’t come from the client at all. There can be a temptation to position your own proposition by pointing out the shortcomings of your predecessor. After all, nothing bonds you with a new client like a bit of professional outrage… except when it backfires. This is why clear internal boundaries matter.

Rachel MacRae

It’s also a controls issue, isn’t it? Firms need to know what their people can say, what they shouldn’t say, when a conversation needs to stop, and when something needs to be escalated. Otherwise you can end up with inconsistent approaches, and that’s when risk creeps in. This isn’t just about telling staff to be careful; It’s about having boundaries that are understood, documented, and supported in practice.

Unknown Speaker

Yes, and there’s a common theme across everything we’ve talked about today: whether it’s pensions priorities, mortgage priorities, consumer understanding, second charge lending, or this complaints boundary issue, the FCA keeps coming back to the same fundamentals. Good customer outcomes. Clear accountability. Evidence. Controls. And not making heroic assumptions.

Rachel MacRae

That last one should probably be on a poster. But yes, if firms can keep communications factual, keep records strong, set proper internal boundaries, and use MI and oversight to drive action, they’re in a much better place than firms relying on intent and a bit of crossed fingers.

Unknown Speaker

That’s a very good place to leave it. Thanks for joining us, and we hope that’s been useful. We’ll be back soon with more from the compliance world.

Rachel MacRae

Thanks everyone. Bye, Vicky.

Unknown Speaker

Bye, Rachel. Bye all.