Treating Customers Fairly (TCF)
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The FSA’s TCF initiative was launched some six years ago. Recently the regulator announced that due to other pressures on their resources such as RDR, they are halting TCF specific visits to authorised firms. However, they also made it very clear that TCF remained a cornerstone of their strategy to ensure that financial services firms put their customers first in everything that they did. TCF applies to both Product Providers and Intermediaries. Broadly, the Regulator intends that: Product Providers should ensure that:
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An Intermediary's primary responsibility is to ensure that:
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the customer has all appropriate information
For advice sales:
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the product is suitable for the customer
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the post sales service meets the expectations created
It is important to note that this does not imply that the FSA expects firms to take on the regulatory responsibilities of other firms in the distribution chain. So on the one hand an Intermediary would not be responsible for unclear information in the Provider's literature. However, in selling this product to a customer the Intermediary must interpret the major points of the literature in a way that its customers would understand.
The TCF exercise, which all regulated firms should undertake, is essentially a "Gap Analysis". For the purposes of this analysis Haven Risk Management has broken down the FSA requirements into 6 key areas:
1. Senior Management Responsibilities:
The FSA have made it very clear from outset that TCF is the responsibility of the firm's senior management. It is not something that can simply be delegated to the Compliance Department. When conducting an on site visit or one of their pre-arranged telephone conversations, (which seem on average to be lasting about 2 hours) they will always demand to speak to senior management and will want to measure how that management has embraced and implemented TCF principles into its business.
Senior management must be the drivers of TCF in any firm because TCF is more than just processes and systems. It is also about culture and strategy. For many firms there may need to be a radical re-think on how it does certain things. This can only happen effectively if senior management are seen to be fully involved and supportive.
2. Communication with Clients:
This is a core area of TCF. If a firm is communicating effectively with it's clients a lot of other desired outcomes result. The firm should ask itself: Do clients clearly understand what it is the firm does? Do clients fully understand what is being recommended to them and why?
It should be remembered that effective communication is more than just making sure that literature is compliant. It is also about how easy it is for clients to have access to the firm, how quickly the firm responds to a client and how the firm takes account of possible difficulties which clients for their part might have, in communicating with them.
3. The Advice Process:
It should be the aim of every regulated firm to ensure that the client achieves the service or product that is appropriate for their needs and requirements. To achieve this, firms should focus on working with the client to identify and agree the right solution for their need, not the one that is right for the individual adviser or firm. On occasions this may mean recommending nothing.
It must be the objective of every firm, that the client ends up with a product or service that they need and understand and where they fully recognise and accept the risks involved.
4. The Post Advice Process:
After a client has bought a product or service the processing side of the business should kick in. It is important for all involved to understand the importance of the back office function and the role it can play in developing client relationships. The back office staff are the ones who may receive initial feedback from clients, determining whether or not they fully understood what it was that they bought.
Back office staff are often the first point of contact in respect of a complaint. How the client is dealt with at this stage can be crucial to any ongoing relationship. They can also be invaluable in providing management with information on issues and trends which can then be used to improve the services provided by the firm.
5. Disclosure and Payment for Services:
Customers can now deal with 3 basic types of adviser: Tied, Multi-tied and Independent. It is important that from outset the client fully understands who they are dealing with, the services available and how the firm is to be paid.
Firms need to ensure that they are able to offer payment options to suit the clients with whom they work. These payment options must be fair and should show no bias to any particular product or provider. Appropriate records need to be maintained on how clients have paid for the relevant service.
6. Staff Competence:
In order to ensure that clients receive an appropriate level of service it is important to ensure that all staff - Advisers, support staff and management, are competent in their roles. The firm should be proactive in encouraging everyone to maintain appropriate levels of competence and where relevant to develop these competences further.
A positive culture of personal and business development can lead to positively motivated staff who in turn, help deliver a professional service to clients.
In order to facilitate a proper and effective TCF Gap Analysis, Haven Risk Management have developed a TCF Gap Analysis tool. The tool has 46 sub-sections and suggests 162 different areas that may be examined. The Analysis then assesses each area on a traffic light system which leads directly into an Action Plan. If this analysis is used diligently with the complete involvement of senior management then firms should not only comfortably meet the Regulator's requirements but should also significantly improve the standard of operations of their firms.
Please contact us for further information.