Legacy Rules ‘Undermine’ Consumer Duty Goals, Research Finds

Why It Matters

If customers misinterpret financial information, they face higher risk of poor outcomes and firms risk non‑compliance with the FCA’s Consumer Duty, threatening trust and profitability.

Key Takeaways

• Legacy rules cut comprehension to 15% despite perceived clarity
• Behavioural redesign doubled understanding, especially with personalized numbers
• Over 80% of customers thought communications were clear, revealing perception gap
• Early adopters gain trust, speed, and lower costs under Consumer Duty

Pulse Analysis

The UK’s Consumer Duty, introduced by the Financial Conduct Authority, obliges firms to ensure communications are not only clear, fair and not misleading, but also that customers truly understand the implications of their choices. Traditional regulatory templates, however, were crafted for legal safety rather than behavioural effectiveness, creating a paradox where messages satisfy formal criteria yet fail to convey actionable insight. This tension highlights a broader industry challenge: balancing compliance with genuine customer empowerment in an increasingly data‑driven financial landscape.

Broadridge’s three‑arm randomized trial of 1,500 savings customers quantifies that tension. While a striking 80% of participants rated the legacy disclosures as clear, merely 15% demonstrated factual comprehension—a classic perception‑reality gap. Introducing behavioural science principles—simplified language, visual hierarchy, and, crucially, personalised numerical scenarios—more than doubled correct responses, with the most pronounced lift in understanding the cost of inaction (32% to 59%). These results underscore that even modest, evidence‑based tweaks can dramatically reduce the risk of mis‑selling and regulatory breaches, reinforcing the business case for user‑centred design.

For firms, the path forward blends advocacy and adaptation. Broadridge recommends pushing for regulatory reform to retire outdated mandates, while simultaneously leveraging behavioural frameworks within existing constraints. Early adopters stand to reap tangible benefits: heightened customer trust, faster product rollout, and lower operational expenses tied to fewer complaints and remediation efforts. As the FCA tightens oversight, companies that embed scientific communication practices will not only satisfy the letter of the Consumer Duty but also secure a strategic edge in a market where clarity is increasingly synonymous with competitiveness.