The Treating Customers Fairly (TCF) juggernaut is finally on track

05 April 2011 Gareth Stokes
Gareth Stokes, FAnews Online Editor

Gareth Stokes, FAnews Online Editor

If you’re one of the hundreds of financial services professionals with a keen passion for golf then you might have to cancel this week’s round. Instead of chasing your ball for eighteen holes you’ll have to spend some time digesting the long-awaited Financial Services Board (FSB) Treating Customers Fairly (TCF) Roadmap. The document – which contains a summary of the TCF concept, proposed timelines for the development and implementation of the regulation in South Africa, plus a review and feedback by the FSB of industry comments received to date – runs to 43 A4 pages! You can obtain a copy of the TCF Roadmap from the FSB… Just visit and download the document by following the link provided.

Getting to grips with the six “fairness” outcomes

Stakeholders in the financial services industry have had a considerable amount of time to get used to the TCF concept. The FSB published their first discussion document entitled Treating Customers Fairly (The TCF Discussion Document) in April 2010. The regulation tackles the unfair treatment of financial services customers from a principles rather than rules-based perspective. “Typically, financial institutions have far more expertise and resources available to them in designing, distributing and servicing financial products than consumers have available to them in making decisions about financial transactions,” notes the FSB. TCF aims to be “a holistic and coordinated consumer protection regulatory framework that applies consistently across the financial services sector – and is tailored to address the specific conduct risks peculiar to the sector!”

The regulation will ensure that the following fairness outcomes (as they apply to financial services customers) are demonstrably delivered by regulated financial institutions. Financial services providers should apply these principles at all times keeping the customer in mind:

· Outcome 1: Customers are confident that they are dealing with firms where the fair treatment of customers is central to the firm culture.

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

· Outcome 3: Customers are given clear information and are kept appropriately informed before, during and after the time of contracting.

· Outcome 4: Where customers receive advice, the advice is suitable and takes account of their circumstances.

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

· Outcome 6: Customers do not face unreasonable post-sale barriers to change product, switch provider, submit a claim or make a complaint.

These fairness outcomes must manifest in financial services corporate culture at every organizational level, and at every stage of the produce lifecycle. The FSB observes: “TCF will require regulated firms to consider their treatment of customers at all stages of their relationship with the customer, from product design and marketing, through to the advice, point-of-sale and after-sale stages.” And although attendees at the recent Association of Savings and Investments (Asisa) 2011 Conference agreed that the TCF regulation largely embodies industry best practice, it will require a concerted effort from all stakeholders for success. Specific challenges include the legacy of decades of unfair treatment of financial services customers and the country’s poor financial literacy situation.

How to implement TCF in South Africa

The FSB has proposed a three pillar model for TCF implementation in South Africa. This model requires different emphasis from firms and the regulator – with “buy in” from a broad range of stakeholders across the industry. The three pillars include: Pillar One – The TCF Framework, Pillar Two – Implementing TCF and Pillar Three – Incentives and Deterrence.

From a service provider perspective firms will have to conduct their business within a regulatory framework comprising a combination of market conduct principles and explicit rules – Pillar One. These principles and rules will be implemented under ‘Pillar Two’ through each company’s culture and governance. The FSB notes: “Firms must demonstrably embed a TCF culture, supported by controls, governance structures, management information and self-assessment.” And finally, under Pillar Three, firms will have to publicly disclose their TCF performance measures to the regulator.

TCF looks slightly different from the regulator’s perspective. Under ‘Pillar One’ the FSB “will develop a framework for effective, intensive and intrusive supervision of firms’ adherence to the market conduct regulatory framework.” They will conduct monitoring by reviewing company reports, off-site analysis and site visits. This monitoring role will be made easier during the ‘Pillar Two’ proactive supervision implementation of TCF. TCF will be designed to allow “proactive monitoring of and response to industry (macro) and firm-specific (micro) TCF risks and outcomes.” Enforcement will include pre-emptive intervention, regulatory imposed sanctions and prosecution of individuals.

Next steps

There are a number of TCF initiatives that will play out through 2011. As a first step the FSB is working on a TCF Self Assessment Tool which will allow regulated firms to gauge their success levels in achieving the TCF fairness outcomes and culture framework requirements. This “test” will include questions focused on each of the six fairness outcomes and will be piloted at between 20 and 25 firms before being made available to the entire industry. “It is important for firms to appreciate, as the FSB does, that although the self-assessment tool will hopefully serve a useful purpose in aiding TCF implementation and understanding, it cannot serve as a definitive ‘template’ to guarantee full compliance with TCF accountabilities!”

A second step will be to conduct a TCF benchmarking exercise to see how well existing financial services practices hold up to the goals and objectives of the TCF regulation. And finally, step three, will be to identify and engage stakeholders to participate in the further roll-out of TCF. The current project timeline pencils in January 2014 as the date from which the FSB will begin enforcing TCF, though changes to the timeline haven’t been ruled out.

Editor’s thoughts: It is extremely difficult to summarise the content of the FSB Treating Customers Fairly Roadmap in a single newsletter. I would urge all financial services professionals to read the document as soon as possible. If you want to get a head start on TCF you should consider to what extent the six “fairness” outcomes already reflect in your business. How does your business stack up against the six fairness criteria? Please add your comment below, or send it to


Added by John, 20 Jun 2011
It appears that the insurance industry makes public protection from thier insurance industry an absolute and imperitve necessity in addition to the governmennt's taxpaid fraud, police and various other public prosecutor bodies and audit companies. With all these bureacratic, costly "protectors" who will end up paying taxes if all become bureacratic tax paid protectors? Protection from what? If we need brokers, mitigators, protection fair trade adjudicators, and a host of "protectors" does this not smack of a protection racket? This appears evolutionary, when it should be arrested and scutinised: A well known man in sales, 10 years of highly, repeat "highly" successful selling in a competive field, can't recall having sold anything! He supplied a need only. He listened to the client.He 'heard' and if available balanced the need to the product . If his company product was not for the client, he would advise the client and point him in the right direction, but certainly not pressure, lie, coerce, misslead or in anyway offer what is not authentic.Perhaps the insurance ind. should be viewed as; "Plug the leak before it becomes a flood" or is that too late???
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Added by Broker, 07 Apr 2011
The FSB is forever thinking about new ways to police especially Brokers in own business. Why do they not protect the public more. Why did they not pull back the licenses of FSP who were selling Sharemax or PIC. They always want to come inton the picture afterwards. Their staff should concentrate on protecting the public but it seems that we have a FSB of thin kers in stead of doers. Further more what is their relationship with insurance companies. All insurance companies have Direct line's selling funeral cover, accidental death and hospital policies that are put together in such a manner that they will never pay out. These direct marketers are exempt from doing FNA. Why? I have had clients telling me that they can't afford their policies, but then they have 10 of these direct policies on their bank staements many times totalling to R 1000 per month. These policies are also not listed on Astute or anywhere, sometimes you can't even find these direct companies. The Direct Companies also keep calling clients when they see they easily except telephonically with the result that the clients are loaded with these policies. Why are these direct marketers exempt from many of the FAIS regulations. These are currently the only people in the insurance industry who are overselling one product and not treating the client unfairly. Why do the thinkers at the FSB not go and sit and think about this, because currently they are defying their objective by turning a blind eye to direct marketers. Is the reason that it will upset their business relationship with their partners, big insurance companies. To me it seems as though the direct marketers are protected by the FSB and don't exist as far as client protection goes!
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Added by BItter, 05 Apr 2011
When is a document going to be releasee by the FSB that treats the broker/agent fairly ??
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Added by Jo, 05 Apr 2011
That will only happen when our ranks are decimated by thoughtless legislation and there are no new blood coming into the industry. The average broker is 52 years old - not long now.
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Added by Ian Rhodes, 05 Apr 2011
TCF is already regulated by way of the General Code of Conduct. Why more legilsation? Why not just amend the existing Code if and where required? It seems as a nation we are intent in smothering the country with legislation which is badly enforced in any event! You cannot enforce the law by simply enacting more and more laws! When are we going to learn that? Then who is going to pay for all of this? Has anyone stopped to think that at the end of the day the Consumer is going to have to foot the bill (again!).
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Added by Fred - R Up, 05 Apr 2011
This is now in a long line of Acronyms, Abbreviations etc blah blah. FAIS, TCF, FICA, POCA, COI this smells more like CYA or else like SOS. Some desk jockey who has no idea of what field work is about dreamt this up over a good heart burn session. I do not see other profeesionals being so stifled to the point of near extinction. Do doctors delcare if they receive kickbacks from pharmaceutical companies for scripts? Do bankers declare if a savings account is more beneficial to client than say a current account? Is there an end in sight to this over regulation? Or should we all cut out the "middleman" and buy our insurance over the phone to our "friendly and caring" automated voice machine? Please push button 0 if this make you boil...
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Added by Peter, 05 Apr 2011
The industry is being over-regulated and badly policed. The general code of conduct under the FAIS act provides for that TCF propses. The only problem I have is that the TCF has no punitive measures against the transgressors; ie the insurance companies. In contrast, the financial planner (FSP’s) has numerous and very serious consequences for non-compliance and transgressions. The playing field is not level between Professional financial planner and direct marketers. Now, the TCF, which was supposed to level the playing field between us (financial planner) and the insures, has introduced a half-hearted piece of legislation that has no consequences for transgressors. Very little new “blood” is coming into the industry. Who is going to look after the next generation once we have retired or have been driven out of the industry. Lastly, I wonder what other professionals, like the Legal profession would say if they had to write exams when, for example, our constitution changed after 1994? Would that have been enforceable and possible?
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Added by Annoyed Advisor, 05 Apr 2011
This year, I'll be 60, am I supposed to go back to school? I'm seriously considering retiring from this industry... but how will I support myself? Why could we not have combined TCF, FAIS, 'Fais-GCC', CPA, FICA and others into one ACT and have an simple language translation for all of us non legal people. Yet the FSB wants insurers and advisors to use SIMPLE language. Their argument that removing the legal language from legislation will loose its intended effect and outcomes is absolute nonsense! The FSB should also apply TCF and GCC to IT'S customers, which are also us !! What if all financial advisors employ attorneys to draw up our documents to present to our clients in a 'legal' format. I also wonder how many FSB and Inseta staffers have financial on-the-field expereince, YET, they will prescibe to us how we should do our job and learnings. PS: I considered joining the Real Estate industry, then I noticed this industry will also suffer the same fate as being expereinced in the financial services industry. Forget job creation in any of these fields!!
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