Companies struggle to meet TCF requirements

Financial services firms tend to design products benchmarked against what their competitors are doing rather than meeting the needs of their customers, according to an interim FSA report into treating customers fairly.

The FSA issued what it described as “cluster” reports last week, where it looked at business practices in 80 com-panies and how they might need to adapt them. A full report will be issued in June.

Consultancy KPMG head of financial services regulation Fiona Fry has warned that for some companies complying with the FSA’s TCF initiative will be like “turning around an oil tanker”.

The consultancy believes that some big firms which have hundreds of different types of products and policies will struggle to meet the requirements of TCF but says that smaller companies without the resources to make the changes will struggle the most.

Fry praises the FSA for providing “long-awaited clarity and guidance” but warns that companies may suffer in the short term.

She says: “Companies have old systems in place and bigger companies will often have hundreds of old products they need to keep an eye on. The challenge for many smaller and medium-sized companies will be to make the changes with the resources they have.”

Fry says changing systems and business practices may reduce profits in the short term but companies will be able to gain competitive advantage in the longer term through increased customer loyalty and customer choice.”

FSA spokesman Robin Gordon Walker says that the regulator is encouraged by the early progress and believes the initiative will not lead to any great upheaval in the market.

“This is not a massive new thing like depolarisation. We are only putting something into place that has been a principal for five years. This is an evolutionary process.”

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