CeMAP FRE2 Ethics, Professional Standards & CPD question: firm's sales director defends

CeMAP FRE2Ethics, Professional Standards & CPD

A firm's sales director defends a new product: 'It saves 90% of customers money, so it does not matter that the other 10%, mostly older customers, will be worse off.' Why is this argument weak for a regulated firm?

A It is not weak: the Consumer Duty is met if most customers get good outcomes
B The Consumer Duty expects good outcomes across groups, so foreseeable harm to a minority must be addressed
C Because utilitarian reasoning is prohibited by the FCA's Principles for Businesses
D Because older customers must never be offered a different product from younger customers

Show the answer and explanation

Answer: B. The Consumer Duty expects good outcomes across groups, so foreseeable harm to a minority must be addressed

The Consumer Duty requires firms to avoid causing foreseeable harm (PRIN 2A.2) and to identify and act on worse outcomes for any group of retail customers (PRIN 2A.9.10R and 2A.9.12R, in force 31 July 2023), so harm to a minority cannot be offset by benefits to the majority. This is the classic weakness of pure utilitarian reasoning. The FCA does not ban outcome-based thinking, and firms may offer different products to different groups where that is fair.

Common mistake

Thinking a good average outcome satisfies the Consumer Duty.

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Original practice material mapped to the published CeMAP FRE2 learning outcomes. Independent, not endorsed by Walbrook (formerly LIBF). Verify figures and rules against current guidance before relying on them.