Treating Customers Fairlycompliance-officer.co.uk/p-i-a/PDFS/What is TCF.pdf · 1 Treating Customers Fairly ... 1.2 Business Strategy ... treatment of customers is central to the

1 Treating Customers Fairly Version: Draft

Treating Customers Fairly (TCF) Staff Training Manual What is Treating Clients/Customers Fairly (TCF)

All firms regulated by the FSA have to support the FSA Handbook’s principle that a firm ‘must pay

due regard to the interests of its customers and treat them fairly’.

The TCF (‘treating customer fairly’) principle aims to raise standards in the way firms carry on their

business by introducing changes that will benefit consumers and increase their confidence in the

financial services industry.


Contents Introduction ....................................................................................................................................... 3

Origins of TCF ................................................................................................................................... 3

FSA Desired consumer outcomes of TCF ........................................................................................ 4

What TCF isn’t .................................................................................................................................. 4

TCF and our business ....................................................................................................................... 4

Assessing and implementing TCF .................................................................................................... 5

What does ‘fair’ mean to our firm? .................................................................................................... 5

Appendix A : Consumer Outcomes in detail ..................................................................................... 6

Consumer Outcome 1 ....................................................................................................................... 6

1.1 Senior Management Responsibility ............................................................................................ 6

1.2 Business Strategy & Values ........................................................................................................ 6

1.3 Staff Awareness .......................................................................................................................... 6

1.4 Remuneration ............................................................................................................................. 6

1.5 Management Information ............................................................................................................ 6

1.6 Record Keeping .......................................................................................................................... 6


2.1 Financial Promotions .................................................................................................................. 7


3.1 Disclosure ................................................................................................................................... 7

3.2 After Sales Support and information ........................................................................................... 7



5.1 Product Performance and Product Risks .................................................................................... 8


6.1 Complaints Handling ................................................................................................................... 8

Financial Advisers - Good and Bad Practice - Outcome 1 ................................................................ 9

Financial Advisers - Good and Bad Practice - Outcome 2 .............................................................. 10



Financial Advisers - Good and Bad Pratice - Outcome 5 ............................................................... 11


Examples OF Management Information (MI) .................................................................................. 13

Notes: .............................................................................................................................................. 14


Introduction

Origins of TCF The FSA's TCF initiative is central to the delivery of their retail regulatory agenda, as well as being a key part to their move to a more principle based form of regulation, as set out in the following FSA principals:

Principle 2 ‐ A firm must conduct its business with due skill, care and diligence.

Principle 3 ‐ A firm must take reasonable care to organise and control its affairs responsibly & effectively with adequate risk management systems.

Principal 6 ‐ A firm must pay due regard to the interests of its customers and treat them fairly.

Principal 7 ‐ A firm must pay due regard to the information needs of its customers and communicate information to them in a way that is fair, clear and not misleading.

July 2007 saw the FSA publish Policy Statement 07/11 ‐ Responsibilities of Providers & Distributors for the Fair Treatment of Customers, which set out the FSA's response to the Discussion Paper of the same title published in September 2006.

The FSA see TCF as a step towards re‐addressing the perceived imbalance in customer financial capability in understanding the complexity of financial services. To provide specific guidance around bridging the imbalance the FSA created their Six Customer Outcomes.

Specifically TCF aims to:

help customers fully understand the features, benefits, risks and costs of the financial products they buy.

minimise the sale of unsuitable products by encouraging best practice before, during and after a sale implications & considerations for both providers and advisers.

We believe that Treating Clients Fairly is about delivering a fair outcome to our clients whilst offering a first class business service. It is embedded in the culture of our firm and our clients can be assured of this as:

We are open about the way we carry out our business and how we are remunerated

We welcome client feedback on a regular basis

We encourage all our staff to continue with their professional development

Our business is our clients, we never forget that.


FSA Desired consumer outcomes of TCF

The FSA has outlined six core consumer outcomes that it wishes to see as a result of the TCF

initiative. These are:

Outcome 1 ‐ Consumers can be confident that they are dealing with firms where the fair

treatment of customers is central to the corporate culture

Outcome 2 ‐ Products and services marketed and sold in the retail market are designed to

meet the needs of identified consumer groups and are targeted accordingly

Outcome 3 ‐ Consumers are provided with clear information and kept appropriately

informed before, during and after the point of sale

Outcome 4 ‐ Where consumers receive advice, the advice is suitable and takes account of

their circumstances

Outcome 5 ‐ Consumers are provided with products that perform as firms have led them to

expect, and the associated service is of an acceptable standard and as they have been led

to expect

Outcome 6 ‐ Consumers do not face unreasonable post‐sale barriers imposed by firms to

change product, switch provider, submit a claim or make a complaint

What TCF isn’t

TCF does not mean:

creating satisfied customers; a satisfied customer could still be treated unfairly and not

know it

that every firm must offer an identical level of service – the FSA recognises that businesses

have different resources and ways of doing things

that the FSA has the final say on which products consumers should want or be sold

that customers are no longer expected to make decisions or take responsibility for them

TCF is about a culture ‐ doing business in a way that will help ensure customers get fair

treatment.

TCF and our business

The FSA ‘Conduct of Business Rules’ support the principle of TCF, so if you’re following the rules

relevant to the mortgage industry, you’re probably already implementing TCF in much of what you

do. However, in order to satisfy FSA requirements, you need to take extra steps to show how

you’re implementing TCF throughout your business.


Assessing and implementing TCF

The FSA doesn’t lay down any standard way in which TCF should be assessed and implemented,

but it has highlighted key areas within the product life cycle where it’s a good idea to have extra

checks in place. These include:

product design

financial promotion/marketing practices

the sales process

information and customer support after the point of sale

complaint handling

In practice this means identifying potential gaps in TCF practice and developing procedures and

checks to plug these in the following areas:

Staff training/awareness of TCF

Sales and marketing material

Product understanding

Advice and sales process

Fact find and flow of information to the client (including after‐sales)

Complaint handling

Remuneration/incentives

Risk assessment of TCF non‐compliance

Record keeping and Management Information

What does ‘fair’ mean to our firm?

All clients understand the services we offer and the price / cost / how we get paid. All clients receive the same initial documents. Advisers apply certain minimum standards to all advised sales (fact‐finds / timely reports). Staff are trained regularly, properly and know their own limitations. The firm adopt certain levels of service standards. Clients understand risks / charges / penalties and limitations of their contracts. Any advertisements / promotions are fair. Any potential conflicts of interest are regularly monitored. All staff are trained on understanding complaints and the procedures to follow. All complainants are dealt with in a positive and fair manner. Wherever possible, clients are educated. When any mistakes are made (on both sides), regular communication continues until the

matter is fully resolved. We understand that some clients require additional assistance and also have limitations. New staff are properly trained on the firm standards and operational systems in use.


Appendix A : Consumer Outcomes in detail

Consumer Outcome 1 Consumers can be confident that they are dealing with a firm where the fair treatment of

clients is central to the corporate culture.

1.1 Senior Management Responsibility FSA will be looking to the senior management of firms to demonstrate that they understand the concept of TCF, have thought about what it means for their business and have implemented it within all aspects of their business operations.

1.2 Business Strategy & Values To operate effectively, it is vital that TCF is embedded within your firm’s values, culture and the way it operates. This means ensuring that in day to day business operations – including when pursuing new business opportunities, that your clients are treated fairly.

1.3 Staff Awareness Whilst senior managers are responsible for TCF, it is vital that all staff (where their role has an impact on the way the firm treats it clients) take on board the concept of TCF and understand what it means for the business and for their role within that business.

1.4 Remuneration Firms must recognise that remuneration structures, bonuses and incentives will impact on staff behaviour which could in turn affect TCF. There has always been much regulatory focus on the remuneration of sales staff, but equally remuneration structures for non‐sales staff (supervisors, administrative staff, senior managers etc.) should also be considered.

1.5 Management Information Firms should use Management Information (MI) to measure whether they are successfully meeting their TCF objectives. It is difficult to be specific about what MI is appropriate as it depends on the size and nature of each firm. However, even very small firms should maintain adequate records which can be reviewed regularly to measure the effectiveness of TCF activities.

1.6 Record Keeping Record keeping and the ability for a firm to produce information to demonstrate that it has control and awareness of its activities are a key expectation of FSA. Inability to produce relevant information is likely to suggest that the firm is not adequately controlled, and this could impact on its ability to demonstrate that it treats its client’s fairly.


Consumer Outcome 2 Products and services marketed and sold in the retail market have been designed to meet the

needs of identified consumer groups and are targeted accordingly.

2.1 Financial Promotions All firms must ensure that their financial promotions (and any other client communications) meet the relevant regulatory requirements and satisfy the general test of being ‘clear fair and not misleading’.

Consumer Outcome 3 Consumers are provided with clear information and are kept appropriately informed before,

during and after the point of sale.

3.1 Disclosure Disclosure is a central element to TCF and the disclosure documents are key to ensuring clients are provided with appropriate information to enable them to make informed decisions.

3.2 After Sales Support and information Firms must ensure that their clients are, at all times, clear about the service they are being provided with, and firms need to ensure that they keep their clients adequately informed on an ongoing basis. Firms must always act with integrity in their dealings with clients regardless of the length of the client relationship.

Consumer Outcome 4 Where consumers receive advice, the advice is suitable and takes account of their circumstances.

4.1 The process of dealing with clients properly and fairly, providing suitable advice and documenting this correctly, are central to a firm’s responsibilities. FSA has raised significant concerns about the quality of advice process in firms offering financial advice.


Consumer Outcome 5 Consumers are provided with products that perform as firms have led them to expect, and the associated service is both of an acceptable standard and also as they have been led to expect.

5.1 Product Performance and Product Risks Firms must ensure that they manage their client’s expectations about the products and /or services they are buying. Where firms have failed to communicate effectively with clients about the characteristics of the products being sold this has lead to examples of misselling or misbuying (e.g. payment protection insurance, lifetime mortgages).

Consumer Outcome 6 Consumers do not face unreasonable post‐sale barriers imposed by firms to change product, switch provider, submit a claim or make a complaint.

6.1 Complaints Handling All firms have a regulatory duty to deal with client complaints. Smaller firms are unlikely to have dedicated complaints handling functions, but when dealing with complaints firms must have adequate controls in place to manage any conflicts of interest


Financial Advisers - Good and Bad Practice - Outcome 1

Consumers can be confident that they are dealing with firms where the fair treatment of customers is central to the corporate culture.

Senior management and staff consider the fair treatment of customers in all that they do. Everyone is

encouraged to get involved, challenge decisions and suggest improvements where appropriate.

Examples of good practice include:

Regularly analysing what is going on, where practices could be improved and taking action when necessary.

Recording decisions and acting on them when required. Remember treating customers fairly is your responsibility – you can’t delegate responsibility to

your compliance consultant If you are using a compliance consultant don’t simply follow their basic consultancy template, make

sure the advice you are getting addresses the issues in your business. Ensuring that risks are clearly explained, particularly when investing in higher‐risk areas such as

emerging markets. Monitoring the advice given across all areas of the business. Using language your customer understands – avoiding the use of technical jargon. Having a training and competence scheme in place for all relevant staff. Holding regular staff meetings so that everyone is up to date with what is going on in the firm. Investigating problems identified by your staff and taking action to put them right.

Examples of poor practice:

Senior management not applying controls to themselves e.g. file reviews, knowledge testing etc. Failing to record the reasons where a different product has been arranged to the one originally

recommended e.g. where a stakeholder pension was recommended but your records show that a personal pension plan was arranged.

Accepting copy documentation for money laundering requirements when you should have sight of the originals.

Not completing your fact find document, e.g. leaving some sections blank. Lack of awareness of advisers giving inappropriate advice, despite consistent poor customer

feedback. Failing to take action on customer feedback. Not having a complaints procedure in place. Not being able to use management information to breakdown sales for each adviser or identify

replacement business. Using a compliance consultant but failing to take recommended actions. Not recording minutes of meetings. Advertising qualifications that you don’t actually have. Taking a fund based commission with no explanation of your services to justify this to your

customer



Products and services marketed and sold in the retail market are designed to meet the needs of identified consumer groups and are targeted accordingly.

The products and services you offer meet the needs of your customer.


Updating the fact find to collect more information if you move into more complex products.

Undertaking regular reviews of high risk products. Keeping a record of recommendations to replace existing contracts and monitoring that

information on a regular basis to identify any trends. Having clear definitions of attitude to risk so your customer can understand what each

means and how they relate to them. Keeping a calendar of review or key dates.


Advisers making fund recommendations based on their own, rather then the customer’s attitude to risk.

Relying on industry colleagues to do market research. Putting all your customers on a platform at the same time without conducting a review to

establish individual suitability. Not having a good understanding of the product you are selling


Consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale

You give your customers clear information about products and services before and during the sale

process and continue to keep them informed after the sale


Using jargon free communications that clearly set out what is being offered. Reviewing correspondence from providers to see if customers have made any fund

switches online following recommendation. Having procedures in place to update clients on progress of applications e,g. a drop in

value.



Not accurately recording the type of product recommended e.g. failure to distinguish between personal pension, pension switch, transfer from occupational pension, transfer into income drawdown resulting in you being unable to accurately monitor the business you have written.

Not explaining products, terms, literature so that your customer has a full understanding. Not informing customers of change in values, costs, allocation rates etc.


Where consumers receive advice, the advice is suitable and takes account of their circumstances.

The advice you give is suitable for the individual customer and takes account of their personal

circumstances


Requiring staff to maintain up to date skills and knowledge e.g. regularly testing their knowledge and following up where there is a training need.

Checking your files for the quality and suitability of the advice/information given, not just that your process has been followed.

Ensuring each adviser has the skills to communicate clearly and effectively both orally and in writing.

Using mystery shopping exercises to test advisers and documenting results to be acted on as part of the adviser’s future training.

Explaining the ‘pros and cons’ of different options before recommending a particular course of action so that your customer is clear why the product is right for them.

Conducting regular due diligence on all discretionary fund managers you are using, making market comparisons to ensure your customer is not disadvantaged by staying with a particular company.

Updating your fact‐find at each review and having a full audit trail of past discussions with your customer.

Sending a ‘jargon buster’ to all customers when giving advice

Financial Advisers - Good and Bad Pratice - Outcome 5

Consumers are provided with products that perform as firms have led them to expect, and the associated service is of an acceptable standard and as they have been led to expect.

The products you sell perform in the way you have led your customer to expect



Delivering what you have promised to the customer. Researching new products to ensure they meet your customers

requirements/expectations. Seeking customers feedback and acting on it. Ensuring the product you recommend matches your customer’s risk profile. Ensuring your customer is kept informed of product performance and of opportunities to

act when circumstances change. Having a system in place to ensure service is delivered in line with your agreement with

your customer.


Failing to adequately research products/providers regularly to ensure the customer gets the best product/service.

Don’t recommend products that you don’t fully understand. Not conducting your own research on providers and products


Consumers do not face unreasonable post‐sale barriers imposed by firms to change product, switch provider, submit a claim or make a complaint.

Your customer understands any restrictions on products, claims processes and is clear about

claims procedures


Being clear at the point of sale about what you can deliver including any restrictions on the product or in relation to the provider.

Ensuring that you keep your customers informed about the performance of a product and any opportunities to act when circumstances change e.g. if your customer invests in an equity product and there is a down turn in the market.

Being clear about what the customer can or cannot claim for. Setting out your complaints process. Identifying and acting on any trends coming out of complaints or customer surveys. Being clear with your customer about how you ensure the fair treatment of your

customers.


Failing to learn from past experience. Not using any existing or past complaints to identify changes you should make to current

initiatives


Examples OF Management Information (MI)

TCF Outcome Types of MI Measurement

1. Consumers can be confident that they are dealing with firms where the fair treatment of customers is central to the corporate culture.

TCF Self assessment/Gap Analysis and action plan.

Compliance consultants reports.

Results from internal surveys seeking staff input on TCF strategy. >

Training & Competence reports.

Reports on staff performance against relevant TCF related measures (for example, KPIs regarding areas such as complaints received,

Cancellations, lapses, not taken up rates etc). Reports on products sold (by type/provider).

Review of Service Standards

Senior management progress and commitment to embedding TCF throughout the business.

Progress on Implementation of Compliance Consultant recommendations (where received), or action following own review.

Staff engagement with TCF. Senior management’s success in communicating TCF throughout the business. High pass rates when staff assessed for

competence. Staff demonstrate a good knowledge of TCF and

TCF risks and adherence to internal policies to achieve TCF.

Identification and effective management of conflicts of interest.

TCF not impaired by poor customer handling.

2. Products and services marketed and sold in the retail market are designed to meet the needs of identified consumer groups and are targeted accordingly.

Customer feedback questionnaires.

Results from selective sampling of execution only business.

Customers demonstrate a high level of understanding of marketing materials, in particular relating to products, services and

risks and not just satisfaction. Customers recorded as execution only

genuinely did not require or receive advice.

3. Consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale.

Results of file monitoring including records of

information obtained from and provided to

the customer.

Mystery Shopping Reviews.

Observed customer interviews.

> Customer feedback questionnaires.

High level of clarity and accuracy of written and oral communications with customers.

Information provided in an appropriately timely fashion.

Customer feedback demonstrates good understanding of information provided, and not just satisfaction.

4. Where consumers receive advice, the advice is suitable and takes account of their circumstances.

Results of file monitoring including suitability letters.

Mystery shopping/consumer research and feedback.

High level of accuracy/appropriate advice provided to customers.

High proportion of customers giving feedback understand why the product sold to them was suitable for them. Customers understand their eligibility to claim on insurance products.

5. Consumers are provided with products that perform as firms have led them to expect, and the associated service is both of an acceptable standard and as they have been led to expect.

Consumer feedback questionnaires.

Complaints –Reasons & Outcomes.

PI Claims – Reasons & Outcomes.

> Claims repudiations

High proportions of customers confirm that they had realistic expectations and that these were met.

No themed issues from root‐cause analyses. Where themed issues are identified action taken is identified and reported.

6. Consumers do not face unreasonable post‐sales barriers imposed by firms to change product, switch provider, submit a claim or make a complaint

Complaints data.

Claims data for protection products.


Claims are handled within agreed service standards.



Notes:

Documents

Treating Customers Fairlycompliance-officer.co.uk/p-i-a/PDFS/What is TCF.pdf · 1 Treating Customers Fairly ... 1.2 Business Strategy ... treatment of customers is central to the