Treating Customers Fairly
Simon Morris PartnerJean Price Head of Retail Banking and Consumer Finance
5th February 2008
What is TCF?
What should have been achieved so far
What needs to be done next
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
What does the agenda mean in real
No formal baseline
A stealth rule
Not in the Handbook
No cost benefit analysis
A lot of guidance
Changes in business culture
Full engagement of senior management
WHAT IS TCF
WHAT IS TCF?
A series of values
That firms must apply
To generate overriding standards and
To deliver the six consumer outcomes
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
Series of Values?
Also known to you and me as
THE SIX CONSUMER OUTCOMES
But not just the Six Consumer
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
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
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
Achieving the six consumer outcomes
How are you doing it?
How are you evidencing it?
WHAT SHOULD HAVE HAPPENED?
What should have been done so far
Specific actions identified
Senior management engaged
Gap analysis performed
Action plan developed
Work well underway
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
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.
Has it been completed?
What did it show?
How was this information used to develop the
Where is the evidence?
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
How did/will the actions taken result in delivery of the six consumer outcomes?
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
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
TCF current dialogue
What does TCF mean for you?
A key area MI
MI = evidence for management
MI = words as well as figures
Design process & testing
Suitable advice review
Post sale track
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
A key area -
Providers & distributors
Consider customer information needs
Post sale responsibility
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
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
How can it be achieved?
Asking the right questions
Think about the questions FSA will be asking
Consider an independent review
So what questions might FSA ask?
From a consumer perspective
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?
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?
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?
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?
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?
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
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?
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
What are your reward strategies for staff?
How are you satisfying yourself that this complies with the requirement to treat customers fairly?
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?
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?
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
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
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?
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?
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?
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?
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?
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?
How will you respond?
The importance of embedding
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
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.
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?
FSA will want to see
And evidence of
Workings of the TCF committee
And if FSAs unhappy
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...