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6 steps to tcf

01 February 2012 Phil Billingham, Perceptive Planning

The Financial Services Board (FSB) plans to implement Treating Customers Fairly (TCF) legislation in South Africa by January 2014. In the first of six articles on the topic, UK-based Regulatory Change Specialist Phil Billingham from Perceptive Planning shares the UK TCF experience...

There are many differences between the UK and South African financial services landscapes which make it impossible to simply re-badge and apply the UK legislation locally. However, it is worth considering the UK experience.

Successful UK financial practices have leveraged TCF to build better and more profitable relationships with their clients. And local financial services firms can learn valuable lessons from offshore companies that have traded under TCF since July 2005. TCF is a principle based legislation built around six outcomes.

Six outcomes

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 are 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

Over the course of this and the next five articles we will place each of the outcomes under the microscope to consider the implications for advisers, planners and brokers.

Difficult to measure

We begin with the first outcome, which is among the most difficult to measure. One of the problems is that the "fairness” of financial advice is only questioned years down the line. Instilling fairness at the client level presents challenges too. After all, who is going to say "I’m nice really – just trust me?” Or even "Thank you Mr FSB, you are right, we will now start treating our clients fairly, what were we thinking before?”

The first outcome is likely to be an internal measure, but one that will be challenged during regulatory visits and the investigation of complaints. How will you know if your firm is addressing the "fair treatment” outcome?

The tell tale signs

One of the signs is your practice’s (or firm’s) approach to regulation and TCF itself. If you are in denial, treat the process with hostility, argue that you’ve been dealing with clients for 30 years and the regulator should get their nose out of your business – then you’re going about things the wrong way.

Another way to clear the hurdle is to extend the concept of ‘fair’ to ‘ethical’. What are the tell tale measures here?

It could be that your firm turns a blind eye to breaches of copyright, and ‘borrows’ material from others. It could be that your firm indulges in and forwards some of the racist and sexist emails that we all sometimes get. It could be… Well, you see my point.

Ethical and accountable

It should be easy for small, client-focussed firms to comply with the "fair treatment” outcome. You can ensure compliance by instilling ethics in your company and tackling the regulation with a positive attitude.

Ask: Does your firm look at situations through the client’s eyes? And are agreements and processes – especially those that are enforceable and contain small print – written with a clear ‘be fair’ mandate?

The best way to assess your progress against the first outcome is to ask your trusted clients and staff how the feel about your existing processes. Their response could surprise you!

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