On 24 February 2026, the Financial Conduct Authority (FCA) updated its webpage on good practice and areas for improvement on the annual Consumer Duty board report by providing extra insight for smaller firms.

Background

Following the FCA’s initial review of firms’ board reports in 2024, the FCA mentions that it knows that smaller firms have different challenges to meet the requirements of the Consumer Duty. The FCA has therefore set out suggestions for how smaller firms might meet its requirements and are open to considering more targeted work where that would be beneficial.

Overview

To summarise, the FCA’s updated guidance relates to the following for smaller firms:

  • Governance – ‘critical friend’: According to the FCA, smaller firms may lack dedicated compliance and audit functions where smaller firms may benefit instead from a knowledgeable ‘critical friend’ to provide impartial feedback on their approach to the Consumer Duty. This may include a ‘critical friend’ helping interpret regulatory expectations in a proportionate way in areas such as informal benchmarking, identifying practical improvements and supporting forward-looking activities such as horizon-scanning.
  • Governance – clear documentation and accountability: Clear documentation of who is responsible for embedding and monitoring the Consumer Duty where senior managers hold multiple roles or for firms that often lack formal committees or a board will support accountability and help ensure good consumer outcomes.
  • Monitoring and outcomes: Smaller firms are often limited in the range of monitoring information they can access. Where proportionate, smaller firms should look for opportunities to draw insights from external data sources, including the Financial Ombudsman Service as well as insight from relevant trade bodies. This can also include qualitative feedback such as observations from frontline staff, customer surveys, interviews or complaints.
  • Actions taken to comply with Consumer Duty obligations: Given their limited resources, smaller firms may find external experts including trade bodies helpful in advising effective actions. This can also include building feedback and pilot checks into their interactions with customers, making timely changes and checks to ensure they are meeting the Consumer Duty. The FCA notes that this can support a culture of ongoing improvement consistent with the aims of the Consumer Duty.
  • Future business strategy: Smaller firms may encounter fewer customers with different specific needs whereby extensive policies and structures dedicated to these customer segments may be unnecessary. The FCA still expects smaller firms to learn from transactions with different groups by embedding what they learn into their strategy to ensure they deliver good outcomes for customers in the future.

Next steps

In CP25/37 the FCA proposed to pilot a sector-specific directory style guide with examples of good and poor practice in the credit broking sector. The FCA are analysing feedback to that consultation and developing more detailed options to test with stakeholders over the coming months.

The FCA will continue to engage with its Smaller Business Practitioner Panel and other smaller firm stakeholders.