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Fair grounds

Satisfying the FSA over its TCF requirements begins with training staff and then ensuring the principles filter down into everyday business, say Morse management consultants Mark Lester and Karen Bond.

Feedback from the FSA suggests that many companies have yet to integrate the treating customers fairly requirements into their normal business procedures.

It is clear that the FSA places great emphasis on firms being able to show they have a TCF culture and that this has cascaded down to the everyday working environment.

Examples of where there should now be evidence that TCF has been taken into consideration are:

  • Product design.
  • Client servicing.
  • Literature design, including factsheets, reports and accounts.
  • Simplified prospectus.
  • Performance appraisals.

    Some requirements, such as client servicing, are fairly obvious as the staff involved will have direct contact with customers and should readily understand how the principles apply to their roles.

    Product designers may be less inclined to think about whether a customer is being treated fairly unless prompted to do so.
    This may be as simple as determining for what type of client a product is suitable. Conversely, if the product is unsuitable for any type of client, it is essential to identify this and then ensure the literature contains appropriate warnings.

    Companies must ensure any staff or distributors selling the product are trained accordingly. It will also be necessary to show that such considerations have taken place and this should be included in product checklists.

    The next challenge is to demonstrate that your staff fully understand how TCF relates to them and are able to articulate this to the FSA when it asks them to do so.

    One method of achieving this will be to run training programmes for staff, covering the aspects that they need to consider and demonstrate as part of their day-to-day jobs.

    This training will need to be geared specifically to their role to ensure its relevance is understood and applied thereafter.
    The outcomes they need to achieve can then be incorporated into their performance objectives.

    A recent FSA survey showed that only 15 per cent of the literature it reviewed was considered to be satisfactory, 35 per cent was considered totally unsatisfactory and the remaining 50 per cent required improvement.

    The FSA has stated that it will be undertaking a second review early in 2009 when it expects to see significant improvements.
    It must be remembered that the average person reading the literature does not have 25 years’ experience in the industry and is also unlikely to be a qualified lawyer.

    It is essential that documentation is written so the average person can understand it without referring to a dictionary or financial adviser.

    The full prospectus needs to be precise but it is imperative that allegedly customer-friendly documentation such as the simplified prospectus and key features should be written in a manner which is easy to understand. The more complex aspects may be signposted to the full document if necessary.

    All this needs to be achieved while adhering to specific content requirements and without overburdening the client with reams of unnecessary and confusing information.

    How do you check whether your documentation meets these needs? One way is to have a third-party review of typical literature undertaken by individuals unconnected with the process of preparing these documents or the design of the product. This can yield useful pointers where clarity, brevity or plain English are required.

    The six TCF outcomes

    The FSA has defined six consumer outcomes, which explain what it wants TCF to achieve for consumers.

    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.

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