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Make MI tech your top priority

Dig deep in your pockets and buy the technology you need to reduce your TCF compliance risk or you should be very frightened of the FSA

With the leaves falling and the days getting shorter, now is the time the industry wakes up and starts national roadshows, new advertising campaigns and product launches.

Immediately before writing this commentary, I have been in a room with 300 IFAs and not one was interested in RDR updates but, instead, very interested in TCF developments.

When I am asked what to watch for in TCF I always reply that it is the use of management information and the cascading of culture through the business that is important. Many IFAs ask for specific deliverables to be able to provide evidence in both of these areas.

Just look at FSA thematic reviews to see where the regulator’s thinking is on TCF.

One of the latest reviews is the FSA thematic review of small Sipp operators which started in December 2008 when they reviewed 60 small Sipp providers. The FSA has written to every small Sipp operator explaining its findings, in particular in the areas of TCF, relationships with firms that give Sipp advice, systems and controls, disclosure of fees and charges and illustrations.

The first and main point raised from the thematic review is that some firms were unable to demonstrate that they treated clients fairly as there was a misconception that TCF only applies to firms which give advice, a lack of understanding about applying the six consumer outcomes and a lack of understanding over what MI to gather.

Many were unable to demonstrate that by using the gathered MI they where able to prove that they treated their clients fairly.

The FSA says it wants “all regulated firms to have analysed how the TCF consumer outcomes apply, to be collecting and analysing data to measure the quality, accuracy and fairness of the services and information provided.

“It is crucial that firms cross-reference and analyse MI and other indicators so that firms can make improvements and act upon what they find. A fuller picture of the service provided and the fair treatment of customers can be obtained if the information is linked together”.

Firms that are unable to demonstrate they are treating their customers fairly tend to have poor systems and controls. This is silly as there are many platforms and technology systems which can help firms with this but, without sufficient investment in the technology, some firms will continue to fall short of the requirements of the regulator. There are also Sipp comparison platforms that can be very useful.

Firms may not have a clear set of procedures and may not review files to monitor the quality, accuracy and timeliness of the services provided. Firms’ senior management should be satisfied that they can demonstrate robust procedures for all aspects of their administration.

So I go back to my original advice to IFAs, manage your MI and cascade the culture of your firm down from the board to the receptionists.

If you have not got a rigorous back office this may be harder to do than you think. Beware, as at least four out of 10 fines levied by the FSA now concern TCF breaches.

As there are just principles not rules governing TCF this in my mind is an uneven playing field as most financial services firms could be fined by the regulator on some TCF discrepancy.

Dig deep in your pockets and buy the technology you need to reduce your TCF compliance risk or you should be very frightened of the FSA.

Kim North is director of Technology and Technical kim@techandtech.co.uk

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  1. Let’s be honest, tcf should naturally be at the heart of a firms corporate culture anyway, however I agree with the above. We live in the 21st century, any firm not embracing technology to demonstrate it’s effective client service should be seriously considering how it does business.

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