FCA Consumer Duty Outcome: Price and value

What firms should consider in their assessment of the fair value of a product or service, specifically?

• the nature of the product or service, including the benefits that will be provided or may reasonably be expected and their qualities

• any limitations that are part of the product or service (e.g. limitations on scope of cover for insurance products), and

• the expected total price customers will pay, including all applicable fees and charges over the lifetime of the relationship between customers and firms

• had a direct read across between the principles and practices in FG22/5 and identified their roles, including responsibilities under PRIN 2A.4.

• should have provided evidence of fair value rather than relying on unevidenced conceptions of their business model or ethos as fair value.
• should have considered how they could provide evidence for their views.

• set out a broad view of the overall costs to the consumer and the benefits the consumer could expect to receive.
• üone firm included an explanation of the value of the parts within a bundle and stated that the price should not be higher than the constitute parts unless there was greater value to the consumer from the bundle.

• had a general assessment of fair value which would apply to a wide range of products and services and needed to consider further how the approach could be adapted to assess fair value across the different sectors.
• in addition, some firms did not make reference to a firms’ profit margins.
• other firms did not consider non-financial costs and benefits a customer would expect to pay or receive such as time and effort.

• showed a wider understanding of the fair value of the products and services with the other outcomes and how changes in the market may affect their fair value assessment of their products and services.
• many firms also considered customers behavioural biases such as instant gratification which might result in poor value.

• did not have a broad understanding of how contextual factors might impact their fair value.
• some firms only considered whether the financial value the customer received was positive and not a critical assessment of the fairness of the pricing structure.
• some firms considered they needed further information from firms in the distribution chain to properly assess their value

• demonstrated differential outcomes for customers in different situations such as some consumers being at risk of paying higher fees and charges.
• some frameworks provided a tailored analysis for consumers with characteristics of vulnerability.
• some firms considered service level cross-subsidies where some consumers pay higher prices or generate higher profits and considered whether these products provide fair value.

• relied on average outcomes rather than analysis to understand the full distribution outcome
• some firms’ assessment showed differential pricing between groups of consumers but did not demonstrate how each group of customers receive fair value

• set out data-led plans to monitor and review customer outcomes to allow sufficient challenge and discussion and most included clear timelines on when to conduct these assessments
• some firms included names owners for any rectification process that may follow as a result, which could also trigger the appropriate level of seniority.

• did not outline how they would monitor fair value or what data they would use or how they would address data gaps.other firms failed to provide clear remediation steps (albeit remediation steps were outside of this FCA review and so may have been set out in other documents).