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Treating Customers Fairly
Simon Morris – PartnerJean Price – Head of Retail Banking and Consumer Finance
1st October 2008
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Covering…
TCF in a nutshell
FSA’s agenda
What is TCF?
What should have been achieved so far
Making sure your TCF MI project meets its
objectives
Some sectoral issues
Hitting the target – what firms need to show
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1. TCF IN A NUTSHELL
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TCF in a nutshell
The timetable
The route
The stance
The review
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1. The timetable
You now receive MI to test if you are
– consistently TCF and
– achieving the six customer outcomes.
By 31 December 2008, this MI will show you
are TCF
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2. The route
1. Look at your business
2. Identify the relevant Outcomes
3. Have a plan to deliver on them
4. Establish an MI measurement mechanism
5. Look at what this tells you
6. And jump at it
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3. The stance
Deadlines non-negotiable
Market conditions no excuse
Needs energy & commitment
FSA is assessing relationship managed firms & acting …
– Board presentation
– VoP
– RMP
– Remedial work
– ENF
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4. The review
What does FSA ask about?
What will FSA want to see?
What if FSA is unhappy?
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What does FSA ask about?
FSA will want to assess
– How have you embedded?
– How have the gaps been closed?
– How are you performing under the T/T?
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FSA will want to see …
Tangibles
– Complaints
– Communications
– Product governance
Intangibles
– Management
– Staff
Governance
– Gaps closed?
– QA?
– Audit trail?
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And evidence of …
Workings of the TCF committee
– Minutes
– Communications
– Champion
– Resources
– Plan
– QA
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And if FSA’s unhappy …
Watch list
Greater supervisory contact
Referral to ENF
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2. FSA’S AGENDA
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FSA’S AGENDAThe move towards more-Principles based regulation
TCF must be an integral part of the business culture
Conversion of good intentions into actual consistent delivery of the six consumer outcomes
Demonstrate TCF by December 2008
Cultural change => tangible customer benefits
Threat of enforcement action
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What does the agenda mean in real
terms?
No formal baseline
A “stealth rule”
– Not in the Handbook
– No consultation
– No cost benefit analysis
– A lot of guidance
Changes in business culture
Full engagement of senior management
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TCF – the bibliography
1. Cultural framework –Progress Report (5.07)
2. Product design – TCF (7.07)
3. Management information –TCF (7.07)
4. Culture – TCF (7.07)
5. Providers & distributors –PS07/11 (7.07)
6. Wrap platforms – DP07/2 (9.07)
7. Measuring outcomes – web pages (11.07)
8. Retail fund managers –
FS08/1 (1.08)
9. PPI – Sarah Wilson
(12.2.08)
10. With-Profits funds – Clive
Briault (27.2.08)
11. Wholesale customers –
Sarah Wilson (15.4.08)
12. Consumer contracts –
Fairness of terms (6.08)
13. MI and good practice –
Progress Update (6.08)
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3. WHAT IS TCF?
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WHAT IS TCF?
A series of values
That firms must apply
To generate overriding standards and
To deliver the six consumer outcomes
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What is the “series of values”?
Giving consumers the confidence that they are dealing
with a firm where fair treatment of customers is central to
the corporate culture
Marketing and selling products that are designed to meet
the needs of and are targeted at identified consumer
groups
Providing clear information and keeping customers
appropriately informed before, during and after sale
Ensuring that advice is suitable in all the circumstances
Providing products that perform as expected and good
service
Making it simple to switch product, provider or make a
claim or complaint
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“Series of Values”?
Also known to you and me as
THE SIX CONSUMER OUTCOMES
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The Six Outcomes
Giving confidence
Design
Information
Advice
Performance
Post-sales
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But not just the Six Consumer
Outcomes…
Acting consistently
Acting contractually
Acting reasonably
Acting competently
Acting in accordance with the “fair treatment” Principles
– Principle 6: “A firm must pay due regard to the
interests of its customers and treat them fairly
– Principle 7: “A firm must pay due regard to the
information needs of its clients and communicate
information to them in a way which is clear, fair and
not misleading
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Applying the values
Must ensure that the six consumer outcomes are delivered
Must be fully embedded at all levels
Must cover every step of the consumer journey
Must be evidenced by good MI
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Generating Overriding Standards
Significant volumes of guidance from FSA on
what it considers to be appropriate standards in certain circumstances
For each firm to set its own standards
Gold-plating – pros and cons
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Achieving the six consumer outcomes
How are you doing it?
How are you evidencing it?
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4. WHAT SHOULD FIRMS HAVE
ACHIEVED SO FAR?
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What should have been achieved so far?
Specific actions identified
Senior management engaged
Gap analysis performed
Action plan developed
Work well underway – in particular firms SHOULD have met the standards required for the 31st March 2008 deadline by now
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Culture – FSA’s Challenge to senior
management
Leadership – TCF central to management
Strategy – TCF integral
Decision making – TCF key factor
Controls & MI – attuned to TCF
Internally – TCF communicated
HR – TCF key element
Reward – depends on TCF
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5. MAKING SURE YOUR TCF MI
PROJECT MEETS IT OBJECTIVES
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Making sure your TCF project meets its
objectives
What MI is required and what should it show?
Capturing MI
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What MI is required and what should it
show?
MI = evidence for management
MI = words as well as figures
– Embedded – staff
– Design – process & testing
– Information – survey
– Suitable advice – review
– Performance – analyse
– Post sale – track
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Capturing the MI
Assurance/action - compliance and management4
Initial analysis - evaluate and elevate3
2 Reports generated – the flow of management information
1 Process stages - your workflow
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6. SECTORAL ISSUES
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Some sectoral areas
With profit funds
– Surpluses
– Inherited estate
– Communications
CIS managers
– Identify market for the fund
– Control and manage distribution
– Review what is occurring
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Wholesale customers
– Deal directly
– Material impact
Consumer contracts
– FSA reviewing under UTCC
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Providers
– Determine market
– Stress test
– Monitor risks
– Chose distributor
– Train distributor
– Consider customer information needs
– Post sale responsibility
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And FSA is looking for in each area
What’s your system to hit the target?
Does senior management oversee and act on MI?
Is the result consistent with TCF?
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How can it be achieved?
Look at what FSA says are examples of good
practice
Robust testing
Ask the right questions – what will FSA ask?
Consider an independent review
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7. HITTING THE TARGET
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What firms need to show
Oversight and Approach
Specific examples linked to outcomes
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Oversight and approach
Senior Management Oversight
– MI packs closely aligned to the “shop floor” packs
– For each business unit, risks to the fair treatment of customers reflected in the risks management framework
– Challenging the data
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Embedding TCF within the business
Stategy and controls of firm to be consistent with fair treatment
Accountability - clear and at an appropriate level
of seniority
Ongoing improvement
Good examples of MI - clear presentation and easy to understand
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The Six Outcomes
What MI is required
Some practical examples
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Outcome 1 - Confidence
Senior Management MI
Senior management interaction with consumers
Monitoring involvement in promotion of TCF culture
Staff incentives and linking to quality checks
Staff feedback
Staff understanding
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Outcome 1 – Specific Examples
Senior management involvement
Training and competence
Staff feedback
Reward
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Outcome 2 - Design
Senior Management MI
Reports on fairness implications of product reviews
Investigating appropriate targetting – actual –v-forecast sales
Customer feedback
Intermediary and distributor feedback
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Outcome 2 – Specific Examples
Products designed to meet customer needs
Product targetting
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Outcome 3 – Information
Senior Management MI
Measure the clarity of information provided to customers
Measure activity of completeness and timeliness for post-sale information – is it up to standard?
Complaints and queries
Post-sales welcome calls
Intermediary feedback
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Outcome 3 – Specific Examples
Financial promotions
Quality of communications
Communications with intermediaries
Post-sales information
Post-sales checks
Complaints
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Outcome 4 – Advice
Senior Management MI
Independent quality checks
Mystery shopping
Analysing complaints and cancellations
Analysing portfolio trades
Identify potential commission bias
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Outcome 4 – Specific Examples
Quality of advice
Customer circumstances
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Outcome 5 – Performance
Senior Management MI
Does it do “what it says on the tin”?
Measure customers experience
What was the customer experience like?
Do the actual number of claims bear out the the expected claims?
Root cause and trend analysis of complaints
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Outcome 5 – Specific Examples
Ongoing monitoring of performance
Service Standards
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Outcome 6 – Post-sales
Senior Management MI
Surveys of successful and unsuccessful complainants
Analysis of post-sales service measures
Early exit penalities
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Outcome 6 – Specific Examples
Barriers analysis
Customer experience feedback
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And finally….
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TCF – Current Dialogue
ARROW assessment
“What does TCF mean for you?”
“Show me”
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So what should you be doing now?
13 weeks to go
See
Challenge
Analyse and monitor
Independent review
Act
Record
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ANY QUESTIONS?
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