Treatment of customers under the Consumer Duty – lessons for investment advisers from other contexts: 2025 supervisory and enforcement risks for investment advisers

This is the final blog in a four-part series covering key supervisory and enforcement risks for investment advisers in 2025. 

The introduction of the Consumer Duty raised the standards that investment advisers need to meet when providing services to retail customers, requiring firms to act to deliver good outcomes for retail customers. As a conduct regulator, the FCA has always focused on consumer protection, with retail investments one of the FCA’s key priority areas. For example, six out of the seven Skilled Person reviews commissioned in Q4 2024/25, and nearly half of all reviews commissioned in the full year, related to ‘Consumer Investments’.

Given this, and to help with their regulatory compliance, investment advisers should take stock of recent FCA enforcement action taken against firms for non-compliant treatment of customers. These cases show how lapses can lead to significant financial penalties – and perhaps even more important – a loss of customer trust. It is also critical that firms consider relevant guidance published by the FCA – failure to do so can be seen as a standalone aggravating factor in an enforcement action.

Themes from recent enforcement cases

Recent enforcement cases have focused on breaches of Principle 6 (treating customers fairly) as the activities in question pre-date the introduction of the Consumer Duty. Given Principle 12 (act to deliver good outcomes for retail customers) sets a higher standard than that imposed by Principle 6, the lessons arising from these cases still apply in a post-Consumer Duty world.

• Customer communications: Firms need to conduct whole-of-customer journey testing, not just point-in-time/single-communication testing. Pro forma communications may have shortcomings, so tailored communications for customers with specific characteristics/vulnerabilities may be required.
• Staff remuneration: Firms must avoid incentives for staff that may be adverse to customers receiving good outcomes.
• Systems, controls, policies and procedures: Firms should implement single-customer-view systems, or robust information exchange between different systems, to avoid clerical errors. Firms should also consider whether policies and processes are Consumer Duty-compliant, have in fact been implemented, and, where relevant, are the root causes of any issues.
• Consideration of vulnerabilities: It is important to train staff to understand, recognise and deal with vulnerabilities. Also, procedural flexibility should be retained to ensure vulnerability issues can be dealt with appropriately.

FCA guidance on treatment of vulnerable customers

Building on these enforcement actions, the FCA’s recent thematic work on the treatment of vulnerable customers provides deeper insights into what good (and poor) practice looks like. See our blog post for further details on the FCA’s review.

Areas of good practice:

• Some firms used data effectively to identify where customers in vulnerable circumstances experienced worse outcomes than other customers.
• Some firms delivered flexible and tailored support, assisted by training of staff to support vulnerable customers.
• Some firms reviewed and improved messaging to customers, tailoring communications and providing them in a timely manner to help customers understand product information.
• Some firms sought customer feedback and incorporated this into product development/review processes.

Common Failings:

• Most firms could not articulate how they monitor effectively and take action on vulnerable customer outcomes. This was because firms were unclear on what good outcomes were or how to measure them, and did not escalate issues or make changes.
• Some firms did not support staff to identify customer vulnerabilities or provide support with an appropriate level of care.
• Firms failed to use appropriate or accessible channels to vulnerable customers and did not test consumer understanding.
• Most firms could not show how they embedded considerations relating to vulnerable customers in product and service design processes.

For investment advisers – whose bread and butter is dealing with retail customers – the risks are acute. Especially where financial decisions are critical to the customer’s long-term financial future. The guidance arising from the FCA’s review is now the benchmark that firms need to meet. As the industry did not, in general, fare that well in this area in the FCA’s review, this will now be a particular area of supervisory and enforcement risk.

Underlining this, Nick Hulme, Head of Department for Advisers, Wealth and Pensions at the FCA, stated in a recent podcast: “Vulnerability is the lens through which we are looking at firms’ overall implementation of the consumer duty… If a firm can’t get vulnerability right, particularly the identification, then how is it getting [its] target market [or] client segmentation right?”

Final thoughts

FCA scrutiny of firms’ treatment of their customers will sharpen in the post-Consumer Duty world. The stakes for firms are high. Compliance with the Consumer Duty demands concrete, results-driven action – particularly when it comes to delivering good outcomes for customers (including vulnerable customers).

For investment advisers, the Consumer Duty is more than a new regulatory hurdle. It presents an opportunity to place customer care at the heart of operations, and build resilience and trust. By taking into account the lessons learned from the enforcement context and the FCA’s supervisory work, firms can go a long way towards mitigating their regulatory risks here.