FCA updates complaints and root cause analysis good practice guidance – what firms need to know

Firms have generally established processes for carrying out root cause analysis of complaints management information, with most able to evidence clear escalation routes and accountability.  However, complaints metrics and data were not sufficiently granular in a number of cases to capture outcomes for different groups of customers, including consumers with characteristics of vulnerability,  making it difficult to monitor whether any groups are receiving worse outcomes than others.

Action point: Review whether your complaints MI dashboard disaggregates data by customer cohort, vulnerability characteristics, and product line. A single aggregate complaints figure will not satisfy the FCA's expectation that firms monitor outcomes across their full target market.

Most firms sampled had a framework for carrying out root cause analysis, set out clearly in policy and process documents.  Yet it was not always evident from material reviewed that firms were taking action after identifying harm, and where firms did make changes, many did not record what the impact of those changes had been, or have monitoring systems in place. It appeared that some firms saw the completion of root cause analysis as the goal, rather than whether further action was needed to deliver good customer outcomes.

Action point: Ensure your root cause analysis process has a clearly documented action planning stage, with designated owners, deadlines, and a requirement to record what change was made and why, not just that analysis was completed.

Many firms that detailed actions they had taken did not set out whether they had checked whether the change was the right one and whether more needed to be done, or whether the change had delivered the desired impact.  Good practice examples included firms that made process changes following customer feedback and then measured impact by reviewing customer feedback and tracking take-up rates of new processes.

Action point: Build a "close the loop" requirement into your root cause analysis cycle, every remediation action should have a defined measurement mechanism and a review date. The FCA expects ongoing monitoring of customer outcomes, not one-off fixes.

Some firms appeared to be sending data to committees as a tick-box exercise rather than as an opportunity to engage and drive change, with no evidence of discussion and engagement on the data by decision-makers.  Where complaints were discussed at Board or executive committee meetings, it was not always clear whether there had been detailed discussion on the data or what actions would be taken, with too often an apparent lack of challenge.

Action point: Review the minutes and records of your governance forums. Can you evidence substantive discussion of complaints data, challenge of the root causes identified, and decisions taken? If not, consider how agenda items are structured and what documentation is produced.

Some firms expanded responsibility for root cause analysis beyond the complaints team, ensuring insights were sent to front-line agents and the risk team who could act on them. Firms that integrated their complaints-handling team more closely with their compliance team were able to demonstrate enhanced risk, compliance, and governance frameworks as a result.

Action point: Map which teams currently receive complaints insight and identify gaps. Process owners, product teams, and the risk function should all be within scope of receiving and acting on root cause analysis findings, not just the complaints team.

One firm adopted the 'Five Whys' problem-solving technique, involving asking 'why' five times in a row, each question building on the previous answer, to encourage deeper thinking and challenge assumptions about the root cause of a problem.  Smaller firms can apply this type of questioning proportionately, without necessarily producing a lengthy root cause analysis document, by testing whether a complaint or other source of insight indicates a wider weakness in a process, communication, or control.

Action point: Consider whether your analytical methodology challenges staff to look beyond the immediate presenting complaint. Surface-level categorisation (e.g. "delay") without interrogating why the delay occurred will not meet FCA expectations.

Smaller firms may receive relatively few formal complaints, and some issues may be resolved informally, potentially making complaints data an incomplete indicator of recurring problems. The FCA suggests these firms consider supplementary checks such as listening to a sample of customer calls, reviewing completed customer journeys, or gathering insight from customer-facing staff.  Where complaints volumes are low, the FCA recommends enriching insight by considering Financial Ombudsman decisions, FCA communications, and relevant industry information to help identify potential harms.

Action point: Smaller firms should not conclude that low complaint volumes mean their obligations are lighter. The FCA's updated guidance explicitly addresses the proportionate steps smaller firms can take, and the expectation of continual improvement remains.

One firm built on complaints MI by using social media feedback alongside its own data to identify common themes.  Another firm looked at Financial Ombudsman complaints that were not upheld, to understand what drove complaints even when the outcome was judged to be fair.  The FCA's framing suggests firms relying solely on formally logged internal complaints data are likely to be missing a fuller picture of customer harm.

Action point: Audit your data sources. External signals, FOS data, industry publications, FCA communications, customer feedback channels should be formally incorporated into your complaints insight framework, particularly where internal complaint volumes alone are insufficient.