Fees and charges remain under close review as the FCA increases its scrutiny of how firms deliver and evidence fair value under the Consumer Duty. Following extensive supervisory sector-wide engagement, the FCA is expected to publish examples of good and poor practice, providing firms with a clearer view of regulatory expectations and the areas attracting most supervisory attention. The FCA’s focus has evolved beyond the completion of fair value assessments. Firms are now expected to demonstrate, through robust evidence, governance, management information and customer outcomes, that fees and charges represent fair value in practice.
This presents both a regulatory challenge and a strategic opportunity. Firms that cannot clearly evidence how fees are calculated, communicated, monitored and challenged, risk regulatory scrutiny, customer harm, remediation activity and reputational damage. By contrast, firms that proactively strengthen their approach can enhance customer trust, improve governance oversight and demonstrate compliance with the Consumer Duty’s Price and Value Outcome.
At Square 4, we have supported firms through FCA exploratory engagement and helped them assess whether their frameworks align with emerging regulatory expectations. Our experience suggests firms should not wait for further FCA publications before acting. The Consumer Duty already provides a clear framework for firms to evidence fair value, support customer understanding, monitor outcomes and consider the impact of fees and charges on vulnerable customers. Firms that act now will be better positioned to demonstrate compliance and withstand regulatory challenge.
Key questions firms should be asking
- Customer awareness and transparency: Do customers genuinely understand the fees and charges they pay, why they apply and the value they receive throughout the customer journey?
- Governance and fair value: Can the firm evidence exactly how fees are calculated, approved and challenged, and demonstrate that they remain proportionate to customer benefits?
- Management Information and ongoing monitoring: Does MI provide meaningful insight into customer outcomes, fair value and emerging risks rather than simply revenue and volumes?
- Vulnerable customers: Can the firm demonstrate that fees and charges remain appropriate for customers with characteristics of vulnerability and that outcomes are monitored accordingly?
Customer awareness and transparency
A fee may be fair, but if customers do not understand it, firms may still struggle to meet the FCA’s expectations. The regulator expects customers to understand what they are paying, why they are paying it and the value they receive in return. Communications should be clear, timely and easily understood across the entire customer lifecycle, from point of sale through to cancellation, exit or product closure. This aligns directly with the Consumer Duty’s Consumer Understanding and Consumer Support outcomes.
This is particularly important where firms apply cancellation charges, exit fees or ancillary costs. Customers should never have to search for key pricing information or encounter barriers when seeking support. Poor disclosure, inconsistent messaging or inadequate customer support can quickly undermine perceptions of fairness and increase the risk of complaints, customer dissatisfaction and regulatory intervention.
What good looks like
Leading firms:
- Test customer understanding of fees and charges across key customer journeys.
- Ensure pricing disclosures are prominent, consistent and understandable.
- Monitor complaints, queries and behavioural indicators that suggest customer confusion.
- Review customer communications regularly to ensure they remain clear, fair and effective.
- Apply the same standards of transparency at product exit as they do at product sale.
Governance and fair value remain key areas of FCA focus
The FCA increasingly expects firms to demonstrate not only that fees are fair, but how they reached that conclusion. Firms should be able to evidence a clear and defensible link between underlying costs, fee structures, revenues and the price paid by customers. High-level assertions that charges are reasonable are unlikely to withstand regulatory scrutiny. Fair value assessments should be supported by robust analysis, documented rationale and meaningful challenge.
Benchmarking against comparable products and services can provide valuable evidence that pricing remains competitive and proportionate. However, benchmarking alone is rarely sufficient. Firms should understand their own value proposition and be able to demonstrate why the charges paid by customers are justified by the benefits they receive.
Most importantly, fair value should not be treated as an annual compliance exercise. The FCA expects ongoing governance, regular review and active challenge from Boards and senior management as costs, market conditions and customer needs evolve. Firms that rely on historic assessments without reassessing whether outcomes remain fair may find themselves exposed under FCA scrutiny.
What good looks like
Leading firms:
- Maintain clear audit trails showing how fees have been developed, tested and approved.
- Benchmark charges against relevant market comparators.
- Undertake regular fair value reviews supported by meaningful customer outcome data.
- Ensure Boards and senior committees actively challenge pricing assumptions and outcomes.
- Demonstrate how governance decisions have resulted in real improvements for customers.
Management Information and ongoing monitoring
Establishing fair fees is only the starting point. Firms must also be able to demonstrate that charges continue to represent fair value over time. This requires management information that focuses on customer outcomes rather than simply operational performance, volumes or profitability. Effective MI should show what customers are paying, the value they receive and whether outcomes differ across products, services or customer groups.
The FCA has reinforced the importance of outcomes-focused and customer-centric MI as a hallmark of good practice. Firms that rely solely on backwards-looking operational or financial data may struggle to identify emerging fair value concerns or demonstrate effective oversight. Strong MI should enable firms to identify deteriorating outcomes, investigate root causes and trigger corrective action before customer harm occurs.
What good looks like
Leading firms:
- Map end-to-end customer journeys to identify key charging points and expected customer outcomes.
- Define clear fair value metrics linked to customer outcomes rather than internal process measures.
- Segment MI to identify impacts on different customer groups.
- Establish thresholds and triggers that prompt governance review and intervention.
- Use MI to support pricing reviews, remediation activity and customer outcome improvements.
The Treatment of vulnerable customers
The FCA has consistently highlighted that firms must understand how vulnerable customers experience products, services, fees and charges. A fair outcome for the average customer does not automatically mean a fair outcome for vulnerable customers. Firms should be able to identify relevant vulnerabilities, assess whether charges create disproportionate detriment and demonstrate how they have considered these risks within their fair value assessments and ongoing monitoring frameworks.
Failure to evidence this consideration increases both regulatory risk and the potential for customer harm. As a result, firms should ensure vulnerability considerations are embedded throughout product design, pricing governance, monitoring and customer support processes.
What good looks like
Leading firms:
- Assess the impact of fees and charges on vulnerable customer cohorts.
- Monitor outcomes separately for customers with characteristics of vulnerability.
- Review whether support arrangements adequately address customer needs.
- Incorporate vulnerability considerations into governance forums and fair value reviews.
- Take proactive action where outcomes indicate disproportionate detriment.
How Square 4 can help
As FCA scrutiny of fees and charges continues to increase, firms need more than a documented fair value assessment. They need evidence, governance and outcomes that can withstand challenge.
Square 4 helps firms assess, strengthen and evidence compliance with the Consumer Duty’s Price and Value Outcome by:
- Conducting FCA readiness and gap assessments – We assess current fee and charging frameworks against FCA expectations, identifying weaknesses across governance, customer understanding, MI, fair value assessments and vulnerable customer considerations.
- Designing and enhancing Fair Value Frameworks – We help firms establish robust methodologies for assessing, evidencing and governing fair value, including customer journey mapping, pricing governance, benchmarking, fair value assessments and Board reporting.
- Building Outcomes-Focused MI and Monitoring Frameworks – We design practical monitoring frameworks that provide meaningful insight into customer outcomes, support regulatory decision-making and enable firms to identify and address emerging fair value risks before they become regulatory issues.
- Strengthening governance and Board assurance – We help Boards and senior management demonstrate effective oversight through enhanced governance arrangements, challenge processes, MI packs and assurance frameworks aligned to FCA expectations.
- Supporting vulnerable customer assessments – We help firms evaluate whether vulnerable customers experience fair outcomes and establish monitoring and governance arrangements that evidence compliance with FCA requirements.
Firms that can clearly demonstrate how fees and charges are communicated, assessed, governed and monitored will be best placed to meet the FCA’s evolving expectations. Those that cannot may find themselves increasingly exposed to supervisory challenge.
If this is an area where you’d like more information, or where Square 4 could support your firm, get in touch here, hello@Square4.com.
Mani Johal – Senior Consultant
Naomi Wyatt – Advisory Director
