Bite-size: FCA updates complaints and root cause analysis guidance
Complaints should drive action not just reporting
The FCA has updated its good and poor practice paper on complaints and root cause analysis, adding new examples and practical guidance, particularly for smaller firms. The regulator reviewed complaints handling and root cause analysis arrangements across 40 firms and places considerable emphasis on the role complaints play in helping firms understand customer outcomes, identify customer harm and improve products, services and processes. Firms that treat complaints as a reporting exercise risk missing the wider lessons hidden within the data. Firms that use complaints well are better placed to identify recurring issues, improve customer outcomes and demonstrate compliance with Consumer Duty expectations.
This paper provides a clearer picture of what good looks like and where many firms are still falling short. The report focuses on the quality and usefulness of complaints data. Many firms already collect large volumes of management information but the FCA found that the quality and depth of analysis varies considerably. The firms that stood out had developed meaningful complaints dashboards, linked complaints data to Consumer Duty outcomes and used that information to identify trends, customer harms and areas requiring attention.
The FCA was particularly interested in whether firms could analyse outcomes for different groups of customers including customers with characteristics of vulnerability. Firms with more detailed data were better able to identify where certain groups were receiving poorer outcomes and take steps to address those issues. The regulator found that many firms still need to improve in this area.
The report also considers the importance of root cause analysis. Most firms had documented processes in place and many had formal approaches to investigating complaints. The FCA's findings show a clear distinction between firms that use root cause analysis to drive change and those that treat it as a reporting exercise.
What good practice looks like
The FCA highlights a number of examples from firms that are using complaints data and root cause analysis effectively. Common themes included:
Detailed complaints management information that allows firms to identify trends by product, issue type, distribution channel and customer group.
Analysis that considers outcomes for customers with characteristics of vulnerability and helps firms identify whether particular groups are experiencing poorer outcomes.
Root cause analysis that looks beyond individual complaints to identify recurring themes and underlying causes.
Clearly documented action plans with named owners, agreed deadlines and accountability for delivery.
Complaints findings being used to improve customer communications, staff training, operational processes and systems.
Governance arrangements that provide meaningful oversight, including escalation of significant issues to boards and committees.
Monitoring to assess whether actions taken have actually reduced repeat complaints and improved customer outcomes.
The FCA notes that firms receiving positive feedback were able to demonstrate a clear link between complaints analysis, decision-making and the actions taken as a result.
The strongest firms treated complaints as the start of the process rather than the end. They identified root causes, agreed action plans, assigned ownership, tracked progress and reviewed whether changes had actually worked. In many cases, the FCA found evidence of firms making changes to systems, communications, processes and customer journeys to prevent issues from happening again.
By contrast, some firms appeared to view root cause analysis as a compliance exercise. The FCA found examples where complaints were investigated and root causes identified, but little evidence that meaningful action followed. It also found firms that could not demonstrate whether changes they had made had improved customer outcomes or reduced repeat complaints.
The FCA expects firms to assess whether interventions have achieved the desired outcome rather than assuming that making a change automatically solves the problem. Firms should be able to show how they monitored the impact of actions and whether further improvements were needed.
Governance remains another area of focus. The FCA found examples of good reporting, clear accountability and meaningful challenge from boards and committees. Where firms performed well, complaints information was escalated appropriately, discussed by senior management and used to inform decision-making. Complaints data formed part of a wider picture of customer outcomes and Consumer Duty monitoring.
The weaker examples tended to involve complaints reports being circulated without meaningful discussion or challenge. In some cases, boards received complaints data but there was little evidence that the information was being used to drive decisions or improvements. The FCA continues to view governance as a key part of Consumer Duty and expects firms to demonstrate active oversight rather than passive reporting.
Smaller firms receive particular attention in the updated guidance. The FCA recognises that many firms may not have sophisticated management information systems or large volumes of complaints data. It makes clear that this should not prevent effective monitoring. Smaller firms can use customer calls, customer journey reviews, staff feedback, Ombudsman decisions, FCA publications and industry information to identify emerging risks and customer harm. The emphasis remains on understanding outcomes and taking action where problems are identified.
The paper reinforces the FCA's view that complaints management forms an important part of Consumer Duty monitoring and governance. The FCA increasingly expects firms to use complaints data as a source of intelligence about customer outcomes. Firms that can demonstrate meaningful analysis, effective governance and clear evidence of action are likely to be better placed during future supervisory reviews. Complaints should help firms understand where things have gone wrong, what needs to change and whether those changes have delivered better outcomes for customers.
Key takeaway
The FCA's expectations have not changed, but the updated guidance gives firms a clearer picture of what good looks like. Complaints should be used to identify customer harm, drive improvements and assess whether those improvements have worked. Firms should review the quality of their complaints data, root cause analysis, governance arrangements and Consumer Duty reporting to make sure they can demonstrate meaningful action and good customer outcomes.
How Auxillias can help
Many of the areas highlighted in the FCA's review are areas where Auxillias is currently supporting clients. We help firms review complaints handling arrangements, strengthen root cause analysis processes, improve complaints management information and develop governance and reporting structures that support effective board oversight. We also work with firms on Consumer Duty monitoring, vulnerable customer frameworks, remediation programmes and regulatory reviews. Whether you are looking to test existing arrangements or address issues identified through complaints data, our team can provide practical legal, regulatory and compliance support.
