Treating Customers Fairly (TCF): What it means for your business

By considering the essence of TCF, the implementation thereof in a broker’s business, some of the practical challenges, we arrive at a real sense of the potential impact TCF will have on our businesses and day-to-day operations.

Since our FSB is leaning heavily on the principle of Treating Customers Fairly as adopted by the FSA in the UK in 2005, case studies abound and many practical lessons can be learnt, which makes it much easier for local players to understand the potential impact of TCF on their businesses and day-to-day operations.

What TCF is NOT

To clarify some misconceptions, it is important to understand what TCF is not.

• TCF does not mean creating satisfied customers. A satisfied customer could still be treated unfairly and simply not know it.
• TCF does not mean that every company must offer an identical level of service. Our different ways of doing things create healthy competition.
• TCF does not mean that customers are no longer expected to make decisions or take responsibility for these decisions.

Understanding the essence

TCF is simply about three factors tied together in a causal loop with each activity impacting the next.

1. The FSB wants to achieve six very specific desired outcomes that concern the customer.
2. As businesses, we have to be able to evidence these desired outcomes at every stage of the product life cycle.
3. The principle of TCF must be driven by our company culture and the way we do business as opposed to a set of defined rules.

1.FSB’s six desired outcomes

• Fair treatment of customers must become central to our corporate culture.
• Products and services must be designed to meet the needs of specific consumer groups.
• Consumers are provided with clear information and kept appropriately informed before, during and after the point of sale.
• Advice is suitable and takes account of the individual’s circumstances.
• Products and services are of an acceptable standard and deliver on expectations created.
• No unreasonable post-sale barriers to change are imposed.

2.Desired outcomes apparent at each stage of the product life cycle

The stages of the product life cycle have been defined in the FSB discussion paper as follows:
• Product design – Your product must meet the needs of its target market.
• Promotion / marketing practices – Marketing and promotional material must be appropriate and understandable to its intended audience.
• Advice – Advice must be suitable and relevant with specific understanding of a customer’s needs.
• Point of sale – Clear and appropriate information must be provided.
• Information and customer support after point of sale – Products must behave as expected and the service standard must be acceptable.
• Compliants and claims handling – No unreasonable post-sale barriers may exist.

3.TCF driven by company culture

To achieve the desired outcomes in such a way that they are apparent at each stage of the product life cycle requires the integration of the TCF principles into your company’s cultural framework.

Again, the FSB has identified that a cultural framework consists of several elements including leadership, strategy, decision-making, controls, performance management and reward.

Borrowing from the UK market, against this framework, some indicators and contra-indicators of the successful implementation of the TCF principle into your cultural framework are detailed in the table below.

Four steps to get started

1.Awareness – Understand what TCF is about. Read articles, attend presentations or use a consultant.
2.Strategy and planning – Set high level TCF principles or objectives relevant to your particular business activities and communicate these to all your staff.
3.Implementation – Allocate resources and responsibilities, and review and align your existing business practices.
4.Embedding – Measure and monitor your TCF performance and commit to maintaining standards in the future.

Critical to your implementation process will be reviewing your existing business practices and implementing appropriate measurement and reporting tools as part of your standard MIS. Effective TCF implementation across the product life cycle will require a focus on certain key areas of your business.

Focus areas

• Staff training and awareness of TCF – Your customer experience will be impacted directly by the skills and knowledge of your staff. Focus on training within your business.
• Sales and marketing material – Ensure all materials are written in plain language, avoid jargon and hidden exclusions, and ensure fees are easily understood.
• Product understanding – Ensure your sales staff really know your products and can highlight and properly explain key differences when compared to competitor offerings.
• Advice and sales processes – Review your sales and service channels and ensure they are suitable to the products you sell. Ascertain whether your customer can afford your product based on income and expenses.
• Needs analysis and flow of information to the client (including after sales) – A good needs analysis is critical to provide appropriate advice. Understand your customer’s needs and ensure your offering is appropriate.
• Complaint handling – Have a focussed approach to dealing with complaints. Record complaints and ensure timely resolution.
• Remuneration and incentives – Introduce service standards and incorporate TCF on scorecards and result areas.
• Risk assessment of TCF non-compliance – Formally track TCF activity through compliance functions.
• Record keeping and management information – Track key ratios such as attrition, loss ratio and sales volumes per product type and percentage of complaints referred to the Ombudsman. Implement customer satisfaction index surveys and ensure feedback is acted upon.

These lists may seem onerous, but they are common sense and, in all likelihood, already key components of your existing strategy.

The challenges

The challenges lie less in the adoption of a customer-centric culture to doing business than in the reality of relatively poor consumer knowledge of financial services and products in South Africa and the ability of the FSB to consistently and effectively measure TCF.

Further unpacking these concerns and understanding how TCF will interact with existing legislation such as the Short-Term Insurance Act, the FAIS Act and the Consumer Protection Act, and how consistency in review will be achieved through the respective roles of the National Credit Regulator, the Registrar for Short-Term Insurance and the Registrar for Financial Service Providers, for example, are key discussion points that require clarification.