Getting to the heart of Treating Customers Fairly

TCF Outcome 3 simply states: "Consumers must be provided with clear information and kept appropriately informed before, during and after the point of sale.” What does this instruction entail?

The consumer environment is changing from one where concepts like "Buyer Beware” and "Do not sign anything unless you understand it” hold sway, to one of "informed consent”. Nowadays the financial services professional must ensure that the consumer is provided with clear information at all times.

What does "clear” mean? It means that your communication must be understood by the end consumer, and if necessary, that you can prove that it is. You have to use plain and simple English, Afrikaans or Zulu – or whichever language is applicable.

To ensure the clarity of our communication we must test our documentation outside the confines of our practices. This is necessary to ensure that non-financial consumers understand what we are saying. It makes sense to provide a glossary of financial terms for consumers to refer to, so that when we mention things like annuity rates, equities and disclosures they can read a definition alongside a relevant example.

The reason for this intervention is obvious. A financial advisor’s world can be so complex – in part due to regulation – that it is near impossible for an ordinary consumer to understand it. That is why ethics, trust and competent advisors are key components in the modern day financial advice environment.

We must do everything possible to communicate the applicable steps in the product lifecycle to our consumers. TCF also requires that we test both our marketing material and sales pitch against a representative sample of our target market.

We are now ready to consider the meaning of the phrase "appropriately informed”. TCF Outcome 3 demands that we consider this phrase in three parts...

This is the "Informed consent” part of the process. Does your client understand enough about the product or service prior to entering into the contract?

Do you keep your client informed of what is happening once they have decided to go ahead with the transaction? You must make sure that your sales processes is well documented – and then make every effort to inform your client of each step along the way.

When writing a life policy, for example, you should keep your clients informed as you progress from underwriting, to obtaining further information, to placing the business. Pay close attention: Telling your client to "call if you have any question” is no longer sufficient. If a significant number of new clients are calling you, your process has failed!

Again, do you ensure that your client is aware of what they have done, the implications of that, and the next steps in the process? Who they call and when, and who will contact them and when?

I hope it is clear from the above that delivering Outcome 3 will be a shared responsibility between the broker and the provider. Any TCF analysis done by both parties must involve discussion with the other party in order to treat the end consumer uniformly.

It is not acceptable that the product provider sits back and says: "That’s the broker’s job”. It is also unacceptable for the broker to act as a post box for whatever material the provider decides to distribute… Brokers should ensure they have a proactive plan in place for communication with their clients. And both broker and product provider should "speak with one voice”.

A last thought: What would a test group of clients say when confronted by Outcome 3? There answer would go something likes this: "That’s obvious. That’s how we would want to be treated. But it doesn’t always happen.”