Consumer Duty Gap Assessment: How to Identify and Close Compliance Gaps

What It Is

A Consumer Duty gap assessment is the structured process by which a firm identifies where its current operations, governance, products, communications, and customer support fall short of the standard required by Principle 12 and PRIN 2A. It is the diagnostic exercise that precedes any meaningful implementation work. Without a rigorous gap assessment, firms are building remediation plans on assumptions rather than evidence.

The assessment must cover all four outcome areas — products and services (PRIN 2A.3), price and value (PRIN 2A.4), consumer understanding (PRIN 2A.5), and consumer support (PRIN 2A.6) — as well as the three cross-cutting rules: acting in good faith, avoiding causing foreseeable harm, and enabling and supporting customers to pursue their financial objectives. Each outcome must be assessed against the firm's specific products, services, customer base, and distribution model. A generic, off-the-shelf gap assessment that does not reflect the firm's actual business is worse than useless — it creates a false sense of compliance.

The gap assessment is not a one-time implementation artefact. The FCA has made clear in its supervisory communications, including PS22/9 and the July 2023 Dear CEO letter, that Consumer Duty is an ongoing obligation. Firms must periodically reassess their compliance posture as products evolve, customer needs change, and the FCA's supervisory expectations develop through multi-firm reviews and portfolio letters.

Why the FCA Cares

The FCA introduced Consumer Duty because decades of principles-based regulation had failed to prevent systemic harm. Firms routinely claimed compliance with Treating Customers Fairly while selling products that did not meet customer needs, charging fees that bore no relationship to value, communicating in ways designed to confuse rather than inform, and creating friction that trapped customers in unsuitable arrangements. The gap assessment is the mechanism by which firms move from abstract commitment to concrete action.

The FCA cares about gap assessments specifically because they reveal whether a firm genuinely understands its obligations. During the implementation period, the regulator reviewed firms' implementation plans and found widespread deficiencies: superficial analysis, missing outcome areas, no connection between identified gaps and remediation actions, and governance that treated Consumer Duty as a compliance project rather than a business transformation. The FCA's multi-firm review findings published in 2024 and 2025 repeatedly identified firms that had completed a gap assessment on paper but had not changed how they operated.

The regulator has also been explicit that gap assessments must be evidence-based, not assumption-based. A firm that asserts it delivers good outcomes without data to support the claim is more exposed than a firm that identifies gaps and documents a credible plan to close them. The FCA's supervisory approach under Consumer Duty starts with outcomes data and works backwards — firms that cannot demonstrate they have measured, assessed, and acted on their own performance will face challenge.

Who It Affects

Every firm within scope of Consumer Duty must conduct a gap assessment. This includes all firms involved in the manufacture, provision, or distribution of products and services to retail customers. Product manufacturers, intermediaries, platforms, appointed representatives, and principal firms all have distinct but overlapping obligations that must be assessed individually.

The nature of the gap assessment varies by role in the distribution chain. A product manufacturer must assess whether its product governance framework — including target market definition, product testing, distribution strategy, and ongoing review — meets the standard required by PRIN 2A.3. A distributor must assess whether its advice or recommendation process ensures products reach their intended target market and whether its communications meet the consumer understanding outcome. Firms that act as both manufacturer and distributor must assess both sets of obligations.

Firm size does not reduce the obligation. The FCA has stated repeatedly that proportionality applies to how a firm implements Consumer Duty, not whether it does so. A sole-trader mortgage adviser must conduct a gap assessment just as a large retail bank must — the depth and formality will differ, but the substance must be present. Appointed representatives cannot delegate responsibility to their principal; the AR must understand and assess its own compliance, while the principal must oversee this process.

What Firms Get Wrong

The most prevalent error is conducting a gap assessment at too high a level of abstraction. Firms assess themselves against the four outcomes in general terms — "we believe our products are suitable" or "our communications are clear" — without drilling into specific products, customer segments, distribution channels, or interaction points. The FCA expects granularity. A consumer credit firm, for example, must assess whether each product line delivers fair value to each segment of its customer base, not whether "consumer credit" as a category is broadly acceptable.

The second common failure is treating the gap assessment as a point-in-time compliance exercise. Firms completed their initial gap assessments during the 2022-2023 implementation period, closed off the identified actions, and moved on. They have not revisited the assessment since. The FCA's supervisory findings confirm this pattern: firms that implemented Consumer Duty as a project rather than embedding it into business-as-usual are now falling behind as regulatory expectations evolve through portfolio letters, multi-firm reviews, and enforcement signals.

A third error is disconnecting the gap assessment from MI. Firms identify gaps qualitatively — through workshops, policy reviews, and management discussions — but do not validate their findings against actual data. If your gap assessment says your communications are effective, but your complaints data shows customers consistently misunderstanding key terms, your assessment is wrong. The FCA expects gap assessments to be validated against available MI, including complaints data, customer feedback, FOS referral rates, product performance data, and any customer testing results.

Finally, many firms fail to assign clear ownership and accountability for each identified gap. A remediation plan that lists actions without naming responsible individuals and setting deadlines is not a plan — it is a wish list. The FCA expects to see named owners, realistic timelines, defined success criteria, and evidence of board oversight of remediation progress.

What Evidence Is Expected

The FCA expects firms to maintain a documented gap assessment that covers all four outcomes and the three cross-cutting rules. This document should identify each gap, reference the relevant regulatory requirement, describe the current state, define the target state, and set out the remediation actions needed to close the gap. The assessment must be specific to the firm's business — not a generic template.

For each outcome area, the FCA expects firms to demonstrate what data they used to assess their position. For products and services, this means target market definitions, product review documentation, distribution monitoring data, and evidence of how product governance processes identify and address products that are not delivering good outcomes. For price and value, the FCA expects documented fair value assessments at a sufficient level of granularity to identify cohorts of customers receiving poor value — particularly where cross-subsidisation or complex fee structures exist.

For consumer understanding, the evidence must include analysis of communication effectiveness. The FCA has stated that firms should test key communications with customers from the target market. Evidence of testing, readability analysis, A/B testing results, or behavioural data showing whether customers understand what they are buying is expected. For consumer support, evidence includes channel availability data, response time metrics, complaint volumes by support channel, and analysis of whether there is friction asymmetry between buying and servicing or exiting.

Governance evidence is equally important. The FCA expects the board or governing body to have reviewed and approved the gap assessment, to receive regular updates on remediation progress, and to have challenged management where gaps remain open. Board minutes, committee papers, and MI packs should evidence this engagement. A gap assessment that has never been presented to the board is a gap assessment the FCA will treat as incomplete.

Good Implementation Looks Like

A firm that has implemented a rigorous gap assessment process starts by mapping every product, service, and customer interaction against the four outcomes. This mapping is granular: it considers different customer segments (including vulnerable customers), different distribution channels, and different stages of the product lifecycle. The mapping identifies where MI already exists to assess outcomes and where data gaps need to be filled.

The gap assessment itself is conducted by a cross-functional team — not by compliance alone. Product owners, operations leads, customer service managers, and IT all contribute, because Consumer Duty gaps frequently sit outside the compliance function's direct line of sight. A fair value gap in pricing, for example, requires input from finance and product teams. A consumer understanding gap requires input from marketing and communications.

Remediation is tracked through a formal programme with board-level oversight. Each gap has a named owner, a defined target state, a realistic timeline, and measurable success criteria. Progress is reported to the board or a designated committee at least quarterly. Where remediation is delayed or blocked, escalation routes are clear and used. Completed actions are validated — not just marked as done — by testing whether the gap has actually been closed. A firm that changed its communications template but did not test whether customers now understand the content has not closed the gap.

The gap assessment is refreshed at least annually and updated whenever material changes occur — new products launched, distribution channels changed, regulatory expectations updated through FCA publications, or complaints data revealing new issues. The annual outcomes assessment draws directly on the gap assessment, showing the board what was identified, what was remediated, what remains open, and what the implications are for customer outcomes.

Related Tool

The MEMA Consumer Duty assessment tool provides a structured, outcome-by-outcome framework for conducting and documenting your gap assessment. It maps your existing MI, policies, and controls against each of the four outcomes and the cross-cutting rules, automatically identifying areas where evidence is missing or insufficient. The tool generates a prioritised gap register with severity ratings, enabling firms to focus remediation effort where the risk of poor outcomes is greatest.

The tool includes built-in templates for fair value assessments, communication effectiveness reviews, and consumer support audits — each aligned to the FCA's published expectations and updated to reflect the latest multi-firm review findings. Output is formatted for direct inclusion in board papers and annual outcomes assessments, reducing the manual effort required to translate operational findings into governance reporting.

For firms conducting their first gap assessment, the tool provides a guided workflow that walks through each outcome area with prompts and examples relevant to your sector. For firms refreshing an existing assessment, it highlights changes since the last review and flags areas where new FCA guidance has raised the bar.

Related Service

Our Consumer Duty implementation service provides end-to-end support for firms at any stage of their Consumer Duty journey. For firms that have not yet conducted a gap assessment — or that recognise their initial assessment was insufficient — we deliver an independent, evidence-based assessment conducted by consultants with direct experience of FCA supervisory expectations.

We work with your team to build the MI framework needed to monitor outcomes on an ongoing basis, design remediation programmes with realistic timelines and clear accountability, and prepare your annual outcomes assessment. Our approach is practical, not theoretical: we focus on what the FCA actually asks for during supervisory reviews and what firms in your sector are being challenged on.

For firms facing imminent supervisory engagement — whether through a portfolio letter, a request for information under section 165 FSMA, or a planned firm visit — we provide rapid-response gap assessment services, identifying and prioritising the most critical exposures and helping you prepare evidence that demonstrates genuine compliance effort.

Related Sectors

Consumer credit firms face some of the most intensive Consumer Duty scrutiny. The FCA's multi-firm work on motor finance commissions, high-cost credit pricing, and buy-now-pay-later products has identified widespread gaps in fair value assessments and target market definitions. Gap assessments for consumer credit firms must address complex fee structures, commission arrangements, affordability assessment processes, and the treatment of customers in financial difficulty. The FCA's Dear CEO letters to consumer credit firms have explicitly highlighted the expectation that gap assessments drive measurable improvement, not just documentation.

Wealth management firms must navigate gap assessments across a broad product range, from discretionary investment management to financial planning and ongoing advice services. The FCA has signalled particular concern about ongoing advice charges where limited ongoing service is provided, making the price and value outcome especially challenging for firms that charge percentage-based fees. Gap assessments in this sector must address suitability, portfolio construction, drawdown advice, and the adequacy of annual reviews.

Insurance brokers occupy a unique position in the distribution chain, acting as both distributors and, in some cases, as product manufacturers where they design bespoke arrangements. Gap assessments must address the broker's obligations in both roles, including commission disclosure, fair value of broking services, clarity of policy documentation, and the quality of claims support. The FCA's review of general insurance pricing practices and its focus on value in the insurance distribution chain mean that brokers cannot afford superficial gap assessments.