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  • Treating Customers Fairly

    Simon Morris PartnerJean Price Head of Retail Banking and Consumer Finance

    5th February 2008

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    FSAs agenda

    What is TCF?

    What should have been achieved so far

    What needs to be done next

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    The move towards more-Principles based regulation

    TCF must be an integral part of the business culture

    Conversion of good intentions into actual consistent fair outcomes for consumers

    Delivery of the six consumer outcomes

    Senior Management involvement

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    What does the agenda mean in real


    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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    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


    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


    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


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    But not just the Six Consumer


    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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    What should have been done so far

    Specific actions identified

    Senior management engaged

    Gap analysis performed

    Action plan developed

    Work well underway

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    Specific actions identified

    Reviewing and recognising what TCF means as specific actions covering the areas identified by FSA and those particular to the firms business

    Considering all steps in the consumer journey

    Dealing with legacy products

    Allowing for strategic change

    Managing conflicts

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    Senior Management Engaged

    In short, we have given you as much space, and as much

    explanation and illustration as you could possibly need. It is

    now time for senior management commitment in firms to be

    translated into action for consumers we recognise that what

    needs to be done varies considerably between firms and we are

    keen to maintain dialogue; but you need to deliver.

    We expect firms senior management to drive a TCF culture

    that is reflected in the firms corporate strategy and applied

    throughout each firm at all working levels.

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    Gap analysis

    Has it been completed?

    What did it show?

    How was this information used to develop the

    business plan?

    Where is the evidence?

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    The Action Plan

    Have all the gaps been closed?

    How did the action plan ensure that the end result would see the embedding of TCF into the

    firms culture?

    How did/will the actions taken result in delivery of the six consumer outcomes?

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    Work well underway

    Focus on the final TCF deadlines

    31st March 2008 appropriate management information or measures in place to test whether

    treating customers fairly

    31st December 2008 must be able to demonstrate through MI that customers are consistently treated fairly

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    FSAs 2008 agenda

    Demonstrate TCF by December 2008

    Cultural change => tangible customer benefits

    Focus on small firms

    Emphasis on management information

    Threat of enforcement action

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    TCF current dialogue

    ARROW assessment

    What does TCF mean for you?

    Show me

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    A key area MI

    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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    A key area -

    Providers & distributors


    Determine market

    Stress test

    Monitor risks

    Chose distributor

    Train distributor

    Consider customer information needs

    Post sale responsibility

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    A key area culture

    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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    What needs to be done by 31st March


    Need to be able to produce evidence to demonstrate that you are consistently treating customers fairly

    Not enough to have the processes in place need to show that you have

    Be ready for sampling second quarter of 2008

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    How can it be achieved?

    Robust testing

    Asking the right questions

    Think about the questions FSA will be asking

    Consider an independent review

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    So what questions might FSA ask?

    Common sense

    From a consumer perspective

    Not comprehensive

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    Product design - 1

    How do you identify target markets - can you demonstrate that you have undertaken qualitative research?

    How do you assess the risks involved with innovative products?

    What are your sign-off procedures and how is responsibility split between your marketing and technical teams?

    What stress-testing do you undertake?

    How do the results of that testing inform your decisions on product modification or alterations in target markets?

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    Product design 2

    How can you demonstrate that your product meets consumer needs?

    Which stakeholders are involved in the design and build stages?

    What are your systems and controls for ensuring that TCF is a core consideration when new products are designed or existing products are updated?

    Have you considered exit strategies for withdrawal of products from the market and, if so, what are they and how do they protect customers?

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    Distribution - 1

    How do you communicate product expectations to your

    distributors and ensure that they understand the

    information you provide to them?

    Do you have a process to prevent the distribution of

    products in certain channels if your research points to a

    lack of customer understanding of a product?

    What is your process for obtaining feedback from

    distributors on who is buying or being sold the product?

    Do you use a platform to sell your products?

    If so, how do you ensure that information is provided in an

    appropriate way and in a timely manner?

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    Distribution - 2

    What is your process for monitoring whether

    what is occurring in practice corresponds to (or deviates from) what you originally planned or envisaged for the distribution of your products or services given the target market?

    What is the process for dealing with any deviation?

    How do you assess the performance of the distribution channels through which you

    products or services are being distributed?

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    Advertising - 1

    Who is responsible for ensuring that advertisements

    comply with all relevant regulatory requirements and the

    overarching requirement to treat customers fairly?

    How does your advertising material make clear what the

    target audience is and what the risks are?

    How can you demonstrate that the pre-sale documents

    are easily understood by the target market?

    What work is undertaken to ensure that customers

    properly understood the content of a promotion they relied

    upon before making a purchase?

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    Advertising - 2

    How do you collate information in respect of complaints

    received in relation to misleading advertisements?

    How does this information highlight issues with particular

    sales channels, demographic areas etc?

    What actions are taken at a senior level as a result of

    such complaints?

    Where subsequent work concludes that advertising

    materials did not meet the requirement to treat customers

    fairly, what are your processes for recalling advertising

    materials and contacting customers who may have relied

    upon those materials when making a purchase?

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    Selling - 1

    How do you ensure that your customers receive clear information at point of sale?

    How do you ensure that sales conversations give a complete and balanced description of

    your products?

    What are your reward strategies for staff?

    How are you satisfying yourself that this complies with the requirement to treat customers fairly?

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    Selling - 2

    How will you show that your processes reduce the chances of mis-selling?

    Do you carry out mystery shopping?

    If so, how are the results of these exercises

    feed back to senior management and how is action taken to resolves issues identified?

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    Advising - 1

    How do your internal processes for assessing the quality of advice demonstrate the delivery of the TCF outcomes?

    What qualifications and experience are required before a person is permitted to carry out a

    review to assess the quality of advice provided?

    How do you make it clear to sales advisors that senior management fully support the TCF process?

    How often is each advisor assessed and how many cases are sampled?

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    Advising - 2

    How does the sampling criteria ensure that you

    are able to decide from the results whether a customer was treated fairly and that the product sold was suitable for the customer?

    Who receives the reports of the sampling exercises and what analysis is undertaken of the results?

    What is the detailed analysis designed to show, and how do you ensure that it meets this


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    Post-sales - 1

    Are you subjecting existing products to a retrospective


    How do your post-sales surveys encourage customers to

    articulate their understanding of the benefits and risks of

    the products and to comment on whether they have been

    treated fairly?

    What information do you collect regarding cancellations?

    What detailed analysis of cancellations is undertaken and

    how does that enable you to draw conclusions as to the

    effectiveness of your TCF strategy?

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    Post-sales - 2

    What information do customers receive after sale and throughout the life of the customer?

    How does this information meet the requirement to ensure that customers are provided with clear information and are kept appropriately informed

    as to the performance of the product?

    What is your process for dealing with customers where a product fails to perform as expected?

    How do you assist a customer to switch from one product to another or to switch to another product provider?

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    Complaints handling - 1

    How can you demonstrate that your complaints strategy is an integral part of overall customer management strategy/TCF?

    Are your desired outcomes clearly defined?

    Is there clear visibility of complaints at Senior Management/Board level?

    Who has ownership of complaints handling and how does the relationship between complaints handling and with compliance work?

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    Complaints handling - 2

    How is root cause analysis undertaken?

    How can you demonstrate that key causes are addressed and actions followed through?

    Can you show that complaint information is used by all parts of the business and fed into all parts of the value chain?

    What MI is produced and circulated to senior management?

    What does it show?

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    Access all areas - 1

    Who receives each management information report and why?

    How often do those people meet to discuss the report?

    How and by whom is the accuracy of the information verified?

    What is the process for ongoing monitoring?

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    Access all areas - 2

    How do you evidence how you intend to act to remedy TCF concerns indicated by the report?

    How is this cascaded to other parts of the business?

    What evidence do you collect to show that, where required, action has been taken to resolve a TCF concern?

    How do you ensure that TCF is fully understood by all staff?

    How easy is for more junior staff to raise a TCF issue and ensure that it is escalated fast and to the right people?

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    How will you respond?

    The importance of embedding

    Published policies

    Employee interviews

    Record keeping

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    The Carrot

    For those firms that rise to the challenge, where

    senior management do drive change with great

    energy .. there will be a regulatory dividend

    supervisors have little reason to ask further detailed

    questions if you produce and use well constructed

    measures of your performance and they show a

    strong story

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    And the Stick!

    But for those firms that miss the deadline and fail to

    take their obligations seriously, our message is

    absolutely clear you will face more regulatory

    intervention. As you know we already act where we

    see significant potential or actual consumer

    detriment, and we will increase the focus and

    intensity of our supervisory work increasingly

    requiring the use of skilled persons; imposing

    demanding risk mitigation plans with challenging

    deadlines; and remediation work. And, of course, we

    do and will continue to make use of enforcement.

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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




    Product governance





    Gaps closed?


    Audit trail?

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    And evidence of

    Workings of the TCF committee







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    And if FSAs unhappy

    Watch list

    Greater supervisory contact

    Referral to ENF

    Treating Customers FairlyCoveringFSAS AGENDAFSAS AGENDAWhat does the agenda mean in real terms?WHAT IS TCFWHAT IS TCF?What is the series of values?But not just the Six Consumer OutcomesApplying the valuesGenerating Overriding StandardsAchieving the six consumer outcomesWHAT SHOULD HAVE HAPPENED?What should have been done so farSpecific actions identifiedSenior Management EngagedGap analysisThe Action PlanWork well underwayWHAT NOW...


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