The Financial Conduct Authority has set five features that of a good Consumer Duty report and five areas for improvement.

The report comes as a result of a targeted and thematic review that the regulator carried out on the first annual Consumer Duty board reports from 180 firms.

Consumer Duty came into effect on 31 July 2023, and on 31 July 2024 for closed products and services. As part of the rules, firms must prepare a report for its governing body setting out the results of its monitoring of consumer outcomes and any actions required as a result of the monitoring.

The financial regulator says five features of a good report include clear outcomes focus, good quality data, analysis of different customer types, clear processes for production of the report and a focus on culture throughout the firm.

The FCA says the report should contain dedicated sections focused on the four outcomes, detailing what they look like for customers holding their products. This should be supported by good quality management information that backs up the firm’s conclusions.

The four outcomes include products and services, price and value, consumer understanding and consumer support.

Firms should also consider different customer groups, including those with characteristics of vulnerability.

In addition, the FCA says firms should have processes in place for producing reports for firms’ governing bodies to review and approve within the necessary timeframe as well as commentary emphasising firms’ commitment to effectively implementing the duty and the role of a positive culture in delivering good outcomes.

Meanwhile, the FCA suggests areas for improvement focus on better data quality, a comprehensive view across distribution chains, an analysis of different customer types, challenge from the board and taking effective action.

The FCA highlights that in some reports, firms did not include sufficient data quality to justify conclusions or to give governing bodies adequate assurance that firms are meeting their obligations under the Duty.

Also, it says that some did not accompany their management information with adequate explanations to clearly illustrate it constitutes evidence of good outcomes for customers.

Elsewhere, other reports did not contain evidence that an appropriate amount and types of information have been shared between the firm and third parties across the distribution chain, while some did not contain evidence that adequate consideration had been given to outcomes for different groups of customers, including those with characteristics of vulnerability.

The FCA also notes that there had been effective challenge from firms’ governing bodies on the content of the reports, for example, through the minutes of board meetings.

Finally, it suggests that some action plans and improvements were not accompanied by further details such as timescales, action owners, and clarity on the data that would be used to evidence good outcomes.