Consumer Duty year 2 — outcomes monitoring for UK IFAs

Consumer Duty year 2 is brutal. Firms that scraped through the July 2024 deadline are now being asked to evidence — formally, with data and worked examples and a board-level annual report — that the products and services they recommend continue to produce good outcomes for the consumers they were designed for, not just at the point of sale but on a continuing basis. Some firms have it. Most don't.

This piece is the practical guide for the partner or compliance lead at a UK IFA firm who is staring at the second annual board report deadline and asking the obvious question: what does "good" actually look like.

What year 2 changes from year 1

The Duty has been live since 31 July 2023 for new and existing products, and 31 July 2024 for closed-book products. The framework — the cross-cutting rules, the four outcomes, the consumer principle — hasn't moved. What has moved is the FCA's expectation of evidence.

Year 1 was implementation: appoint a Consumer Duty Champion at board level, map the firm's products and services to defined target markets, run a fair-value assessment on each one, refresh consumer communications, document the lot. The annual board report was retrospective and largely narrative.

Year 2 is monitoring. The firm has to show that the controls put in place in year 1 are actually producing the outcomes claimed for them. The board report shifts from "here's what we did" to "here's what we observed in the data, here's what we did about the gaps, here's how we know."

The four outcomes — and the metrics that go with each

The Duty defines four outcomes. Each one has a recognisable shape and a recognisable set of metrics an IFA firm can monitor against it.

Outcome 1 — Products and services

The products you recommend should be designed for the consumers you recommend them to. For an IFA firm that doesn't manufacture products, this collapses to: are the products on our panel still suitable for the target markets we recommend them to.

Practical metrics: portfolio-fund performance against benchmark and against the target outcome the client was sold (income, growth, capital preservation); concentration risk in panels; rate of fund replacements; complaints linked to specific products; and any signal from the manufacturer's own Consumer Duty target-market statements that should change how you use the product.

Outcome 2 — Price and value

Consumers should pay a price reasonable relative to the benefits they receive. This is the fair-value assessment outcome, and it covers your own ongoing-service fees as well as product charges.

Metrics: total cost of ownership for each client segment (ongoing fee, fund OCFs, platform charges); benchmarking against publicly available alternatives; service-utilisation data (did the client take the reviews, did they use the cashflow tool, did they engage with the annual statement); and case-level analysis of clients paying ongoing fees who did not receive the contracted service in the period. That last one is the FCA's particular focus. We've written separately on the fair-value assessment template.

Outcome 3 — Consumer understanding

Communications should be understandable and timely. For an IFA firm, this is suitability reports, fact-finds, illustrations, ongoing reviews, fee documents, and the language used in client meetings.

Metrics: readability scoring of standard documents (Flesch reading-ease or equivalent); rate of client questions after issue (a high rate suggests the document didn't land); read-through rates on electronic documents where you can capture them; and qualitative review of complaints linked to misunderstanding.

Outcome 4 — Consumer support

Consumers should get the support they need, when they need it, without unreasonable barriers. For an IFA firm, this covers responsiveness, accessibility of advisers, the experience of vulnerable customers, and the ease of leaving or changing service.

Metrics: response times to client requests; complaint volumes and root causes; vulnerability flag rate and adaptation outcomes (see our vulnerable-client guide); time to action on client-initiated changes; and any friction-points in onboarding or off-boarding.

What the year-2 board report actually contains

The annual Consumer Duty board report is the artefact the FCA will ask for if they ever look at the firm. It is also the artefact a s.166 reviewer would want. Treat it as the single document that proves the firm did the work.

A defensible year-2 report runs to 25–60 pages depending on firm size and contains the following sections. None of these are optional.

• Target market definitions, restated from the year-1 work, with any changes flagged
• Outcomes dataagainst each of the four outcomes, segment-by-segment, with year-on-year comparison
• Identified harms— where outcomes data shows a problem, what was identified, when, and what the firm did about it
• Foreseeable harm prevention— what the firm proactively did to prevent harm that hadn't yet shown up in the data
• Vulnerable-customer outcomes— a dedicated section now expected as part of year-2 reporting
• Distribution-chain assurance— for products you recommend that you don't manufacture, evidence that the manufacturer's Consumer Duty disclosures have been read, understood, and reflected in your panel decisions
• Forward plan— what the firm intends to change in year 3 based on what year 2 showed
• Board challenge and sign-off— the minutes of the board meeting that approved the report, showing genuine challenge, not rubber-stamping

The last point is the one most firms get wrong. The board sign-off is not a procedural step. It is the evidence that someone senior in the firm asked hard questions about the data and was satisfied with the answers. Board minutes need to show the questions.

The deadlines that matter

The Duty's annual reporting cycle runs to the firm's own financial year. Most IFA firms report on a calendar year and produce the report in Q1 of the following year. The 2025 reporting year report should be signed off by the end of Q1 2026. The 2026 reporting year report — the one in scope here — needs to be signed off by the end of Q1 2027.

Practically, that means the firm should have monitoring data captured monthly through 2026, mid-year review at the board in October or November, drafting in January or February 2027, board approval by 31 March 2027. Firms that wait until February to start gathering the data have already missed.

What firms typically get wrong

Three patterns recur in conversations with the partners we speak to.

Treating outcomes as binary.Outcomes data is not "good or bad". It's a distribution. A target-market segment where 92% of clients are tracking to the target outcome and 8% are not is interesting. The right next question is: who are the 8%, what's the common factor, is it a firm-level issue or noise. Firms that report headline averages without distribution analysis are missing the whole point.

Missing the closed-book.Closed-book products — funds that are still held by your clients but are no longer accepting new business — were brought into scope on 31 July 2024 and many firms still don't have them properly monitored. They're often the products with the worst fair-value picture.

No genuine board challenge.Boards that approve the report without minuted challenge are the firms the FCA will home in on. Get the minutes right. Show the questions.

What a defensible monitoring infrastructure looks like

You don't need a six-figure technology investment to monitor outcomes well. You do need three things in place.

A defined data layer where the firm's client records, fee data, product holdings, complaint records, and vulnerability flags are queryable as a single source of truth. If that data lives across five disconnected systems you'll spend more time reconciling than analysing — and you won't have time for the analysis.

A reporting cadence that runs monthly at the operations level, quarterly at the management-committee level, annually at the board level. Each level reviews data the next level up will summarise.

A clear escalation route. When monthly data shows a metric drifting, someone is responsible for investigating, the investigation is recorded, and the action taken (or the decision that no action is needed) is documented.

Firms that do this well treat Consumer Duty monitoring as a normal management discipline, not a separate compliance exercise. It is, in effect, the management information the firm should have wanted to see anyway.

Where Wealth Analytica fits

Outcomes monitoring needs data, and most IFA firms have their data fragmented across CRM, analytics platform, suitability tool, and spreadsheets. Wealth Analytica unifies the lead-to-proposal pipeline so the client record sits in one place — which means the outcomes data sits in one place too. The platform doesn't write your annual board report. It does make sure that when you sit down to write it, the data has been waiting for you.