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Categories:Regulation

Fair play

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Chris Kilner, compliance consultant at Simply Biz, hopes the regulator’s new guidance on treating customers fairly will clear up some hazy areas for advisers

It is highly unusual for IFAs to welcome the introduction of additional FSA regulation but I believe that this will be the case if the rumoured treating customers fairly rules are brought into play.

Since the introduction of the TCF principles in 2007, the vast majority of advisers I have spoken to have been desperate for practical guidance in terms of a tangible process to follow in order to meet TCF requirements within their firm.

The biggest difficulty has arisen from the subjectivity of the “fairness” in question. In 15 years of working with IFAs, I have never come across even one who thinks they are treating their customers unfairly.

Advisers being asked to increase the fairness of processes which they already believe are fair, with no clear advice on how to make those adjustments, are understandably struggling.

At this stage, it would be foolish to try to predict the exact rules which the FSA might introduce but I think more guidance on the regularity and content of communications to clients would be particularly welcome.

Communication is a major part of several of the TCF principles. TCF outcome six states: “Consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale.”

In theory, this sounds straightforward but we know advisers can be thrown by trying to formulate a standardised level of clear information and keeping customers appropriately informed that they can put into practice in reality. Should the levels even be the same for every client?

Many advisers have tried to address this principle by providing clients with every bit of available information as often as they can while others feel communicating so frequently with a customer who used them to sort out a pension 10 years ago would be inappropriate.

I am not suggesting that a competent IFA would be unable to judge the appropriateness of frequency of communication with their clients but a formal structure for deciding the regularity and content of communication would be valuable for advisers.

To ensure the introduction of legislation further down the line does not take them by surprise, it might be advisable for IFAs to start considering these areas now.
The good news about another TCF principle - that of ensuring any advice given and products sold are suitable for the specific circumstances of that client - is that the technology available to support fact-finding, product research and generation of recommendation reports has developed in leaps and bounds since 2007.

SimplyBiz has long advocated the importance of consistent and compliant advisory processes that can be followed by any adviser in a firm.

We offer Distribution Technology software to the companies that use our services and there are also several other good products available, such as Truth and Finametrica.

Using a system that is reliable, robust and repeatable should satisfy this outcome. I would find it surprising if FSA legislation brought anything more substantial than having a tried and tested process to be applied consistently to all clients.

Experience of IFA firms over the years tells me the vast majority already have rigorous guidelines in place to ensure that they do not fall foul of the latter part of outcome five “(Consumers find that)…the associated service is of an acceptable standard and as they have been led to expect.”.

I have found that IFAs are generally good at delivering high levels of customer service, even before the advent of TCF. Long before they had to be nice to customers to meet FSA regulation, the majority of IFAs realised that happy clients meant recommendations and repeat business.

To ensure the introduction of formal TCF regulation does not take your firm by surprise, read through the outcomes and check you have considered and addressed each of them.

All firms should have now had their TCF interview and should know first-hand that the FSA focuses on an outcome-based approach to meeting the principles of TCF.

The FSA is unlikely to expect firms to implement any changes overnight so, as long as you are comfortable that you are on the right path, there will be plenty of time to make adjustments to your existing TCF protocols.

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