Financial Conduct Authority (FCA) UK Regulation Sample Exam

In launching a new product, how must it comply with the FCA’s treating customers fairly consumer outcomes?

1. It must be advertised widely

2. It must be appropriately targeted

3. It must come with a money-back guarantee

4. It must be innovative in design

The correct answer is: It must be appropriately targeted

To ensure that a new product complies with the FCA’s treating customers fairly (TCF) consumer outcomes, it is essential that the product is appropriately targeted. The core principle of TCF is to ensure that financial firms consider the needs of their customers at every stage of the product lifecycle. This means that products should be developed and offered to the specific segments of consumers for whom they are intended, based on an understanding of their needs, circumstances, and the benefits they can derive from the product. When a product is appropriately targeted, it is more likely to meet the actual needs and expectations of the intended customer base. This helps to prevent misunderstandings and mis-selling, ensuring that customers receive products that are suitable for them and that they understand their features and risks. As a result, targeting strategies play a crucial role in promoting fair treatment and enhancing customer satisfaction. While widespread advertising, guarantees, and innovation can contribute to a product's success, they do not directly align with the fundamental TCF principle of ensuring products are aimed at the appropriate audience. Thus, focusing on appropriate targeting directly addresses the FCA's concern for fair treatment in financial services.