Consumer Duty consultation: what advisers and paraplanners need to know

The FCA's latest consultation on Consumer Duty is not about scaling back consumer protection. Instead, it is an attempt to make the framework more targeted, proportionate and practical for firms operating across increasingly complex distribution chains.

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For advisers and paraplanners, the proposals matter because they could reshape how pension providers, platforms, SIPP operators, discretionary fund managers (DFMs) and product manufacturers apply their Consumer Duty obligations.

If implemented, the changes could reduce duplication, clarify accountability and help firms focus on the areas where they can genuinely influence customer outcomes, while maintaining robust protections for consumers.

The consultation paper, Consumer Duty: Scope and Proportionality (CP26/23), spans more than 275 pages. Below is a summary of the key proposals and what they could mean in practice.

 

"The FCA wants Consumer Duty to become more focused, proportionate and predictable, not less protective."

 

Why is the FCA reviewing Consumer Duty?

The FCA's starting point is that Consumer Duty remains central to delivering good outcomes for retail customers.

However, the regulator recognises that some firms have interpreted the rules more broadly than intended, leading to extensive compliance processes, overlapping controls and increasing information requests across distribution chains.

To address this, the FCA is proposing four key changes:

1. Removing most non-UK customer business from the duty's scope.
2. Clarifying which firms and activities fall within scope.
3. Applying responsibilities more proportionately across distribution chains.
4. Providing greater clarity on how Consumer Duty interacts with existing product governance requirements.

For advisers and paraplanners, the key message is clear: not every firm involved in a retirement or investment proposition should carry the same level of responsibility for customer outcomes.

Instead, obligations should reflect a firm's ability to influence those outcomes. This is particularly relevant where advisers, providers, platforms, DFMs and asset managers all play distinct roles within a client's investment journey.

Consumer Duty and non-UK customers

One of the most significant proposals is to limit Consumer Duty primarily to customers who are usually resident in the UK.

The FCA believes firms operating internationally can be subject to overlapping and sometimes conflicting regulatory requirements where both UK and overseas consumer protection regimes apply. Reducing this overlap could lower compliance costs while maintaining appropriate safeguards.

There is, however, a particularly important exception.

 

"UK pension business will remain within Consumer Duty scope, even where the member lives overseas."

 

This means the following activities would generally continue to fall within the scope of Consumer Duty requirements:

• UK pensions
• Pension transfers
• QROPS-related activity
• Pension advice and pension arrangements

For advisers and paraplanners working with expatriate clients, this distinction will remain highly relevant.

Greater clarity on who is responsible

A key objective of the consultation is to provide greater certainty around which firms genuinely influence customer outcomes and which perform primarily operational or support functions.

The FCA is proposing clearer guidance on concepts such as:

• Retail market business
• Distribution chains
• Product manufacturing
• Material influence
• Products and services

One of the most important developments is the proposed shift away from elements of the current co-manufacturing model towards a principal manufacturer and secondary manufacturer framework.

The aim is to create clearer accountability where multiple firms contribute to the design, manufacture and distribution of products.

For advisers and paraplanners, this could mean many infrastructure providers and operational service providers no longer need to demonstrate Consumer Duty compliance in areas where they have little direct influence over customer outcomes.

This should improve clarity around where responsibility sits within the value chain.

A more proportionate approach across distribution chains

This is likely to be one of the most welcomed aspects of the consultation.

The FCA acknowledges that some firms have interpreted Consumer Duty as requiring them to oversee, monitor and effectively police the activities of other firms within the distribution chain.

The regulator has explicitly rejected this interpretation.

Instead, firms will generally be expected to:

• Take responsibility for their own conduct.
• Identify and address foreseeable consumer harm.
• Obtain only the information necessary for their role.
• Focus on outcomes they can genuinely influence.

For product providers, platforms and SIPP operators, this could significantly reduce the volume of due diligence exercises and management information requests currently exchanged between firms.

A provider with direct customer interaction may still require extensive vulnerability processes and monitoring procedures. However, organisations with predominantly administrative or operational responsibilities may only require more limited arrangements.

 

"Firms should focus on the outcomes they can genuinely influence, rather than policing the actions of others."

 

For advisers and paraplanners, the result could be clearer accountability across providers and less duplication of Consumer Duty oversight activities.

How Consumer Duty fits alongside existing rules

Many firms have argued that Consumer Duty duplicates existing regulatory obligations, particularly those arising from:

• PROD 3 product governance requirements.
• Consumer Composite Investment (CCI) disclosure rules.

The FCA's response is that Consumer Duty should complement these frameworks rather than replicate them.

For product manufacturers, compliance with existing PROD requirements can support Consumer Duty compliance, particularly in relation to product design, governance and target market assessments.

However, the FCA makes clear that:

• The Price and Value Outcome remains a separate Consumer Duty requirement.
• Compliance with PROD alone may not satisfy all Consumer Duty obligations.
• CCI disclosures support customer understanding but do not automatically fulfil Consumer Duty requirements.

The consultation also reinforces an important principle: firms should generally only be accountable for matters within their control.

For advisers and paraplanners, this should help clarify the boundaries of responsibility between fund managers, platforms, providers and distributors.

Technical changes and rule clarifications

The final chapter contains a series of technical amendments designed to improve drafting and align the rules more closely with the FCA's original policy intentions.

These changes are not intended to introduce significant new requirements. Instead, they seek to address areas where firms may have interpreted the rules too cautiously.

The amendments include:

• Clarifying Consumer Duty scope.
• Removing outdated references.
• Simplifying overlapping requirements.
• Updating supporting guidance.

While less headline-grabbing than some of the other proposals, these technical clarifications should help improve consistency across the industry.

What does this mean for advisers and paraplanners?

The overarching theme of CP26/23 is that the FCA wants Consumer Duty to become more focused, proportionate and predictable, rather than less robust.

If implemented, the proposals should:

• Clarify where Consumer Duty applies and where it does not.
• Reduce duplication across distribution chains.
• Create clearer accountability between manufacturers, providers and distributors.
• Limit unnecessary compliance activity.
• Allow firms to focus resources on areas where they can genuinely improve customer outcomes.

For advisers and paraplanners, the consultation provides valuable insight into how providers, SIPP operators, platforms, DFMs and asset managers may evolve their Consumer Duty frameworks over the coming years.

The bottom line

The FCA is not seeking to dilute Consumer Duty. Instead, it is attempting to refine the framework so that obligations sit with the organisations best placed to influence consumer outcomes.

If adopted, the proposals could create a more efficient regulatory environment, with clearer responsibilities, fewer overlapping processes and reduced administrative burdens across distribution chains.

Most importantly, the FCA's expectation remains unchanged: firms must continue to deliver good outcomes for retail customers. The difference is that those responsibilities should be applied in a way that is proportionate, practical and aligned with each firm's role.

"The likely outcome is a regulatory environment with clearer accountability, lower operational burdens and consumer protection firmly at its core."