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Nic Cicutti: Regulator deals death blow to TCF

Almost a decade ago, a new buzzword began to do the rounds within the financial services industry – TCF. Back then, my own online searches came up with the term “tactical combat force” to explain those three letters.

As it turned out, the FSA had come up with its own version: the far more boring “treating customers fairly”.

A week or so ago, the regulator announced it is scrapping a series of work-shops aimed at helping IFA businesses make sense of TCF. Actually, the news is more significant than that bland statement. If my interpret-ation of the move is correct, it signals the death knell for TCF in its current form.

After all, the roadshow “experience” was part of a concerted attempt to involve firms that were due to be formally assessed by the FSA in terms of how they were meeting TCF principles. The aim was to help them better understand the regulator’s requirements, work through case studies relating to their sector and discuss these issues with other firms.

It was only after the roadshow that firms then faced an interview with an FSA staff member. This included a discussion about leadership, business decisions, controls, recruitment/training and rewards, plus follow-up visits for up to one-quarter of the businesses assessed, lasting between half a day and a day.

But if you do away with the workshop – the initial part of the whole process – it becomes infinitely more difficult to put in place the remaining building blocks that come together to form the over-arching TCF architecture.

Ten years ago, I was ambivalent about TCF. For years beforehand, I had found myself wondering how it was that despite all these supposedly tough rules put in place by the FSA and its predecessors, very little seemed to be changing in terms of how advisers were dealing with their clients.

Although rules were deemed necessary precisely because so many advisers and providers are incapable of even the tiniest glimmer of understanding about how to treat their customers, catastrophic misselling and poor advice remained rife.

Many of the same mistakes were being made by providers and IFAs. Equally, many advisers themselves felt over-burdened by this plethora of difficult to understand rules they believed were designed merely to catch them out. Maybe something more linked to the direct experience consumers have at the hands of the industry would be more useful. If so, perhaps TCF was it.

On the whole, TCF has not worked as well as it might have done. Partly to blame is that the concept itself has always been seen as slightly nebulous

The problem is that, on the whole, TCF has not worked as well as it might have done. Partly to blame has been that the concept itself always risked being seen as slightly nebulous, even though the FSA’s website carries a wealth of information that ought to help small businesses.

The other problem was that there was always a separation between the stated aims of organisations and their practice. On the one hand, research by the regulator found senior executives were keen to support the notion of being fair to their customers and rightly identified the issue as critical to their future commercial success. On the other, practice often lagged far behind the reality. For example, in terms of product development, an assessment of customers’ real needs or the risk to them of certain products was not always automatically carried out.

As for complaint handling, some firms were turning down consumers’ complaints, yet the minute the individual concerned announced he or she would appeal to the Financial Ombudsman Service, the complaint would be upheld by the company.

Nor was effective use made of trend data from complaints, which would have helped ensure both that other similar complaints were treated fairly but also that the underlying cause of the problem could be investigated and prevented from happening in future.

This was all evident back then – and it would be fair to say many of the same problems bedevil the industry today. Look at all the examples where firms have gone bust in recent years after selling fiendishly complicated products investors did not understand and burdening IFAs with hundreds of millions of pounds worth of compensation payouts. Or where the FSA has fined banks and other institutions for failing to address complaints fairly.

In one of my more naive moments, I hoped IFAs and the industry as a whole would welcome TCF, if only with some initial scepticism. I assumed they would find it easy to differentiate themselves from other so-called distribution channels – and, in fairness, many of them did.

Additionally, the FSA repeatedly told the industry that in return for a far greater commitment to treating customers fairly, it was prepared to move towards principle-based legislation, raising the bar for advisers to a new level. Oh, and by the way, consumers would have benefited, too.

Yet it all seems to have faded away into nothing. The FSA seems to believe the retail distribution review will somehow take the place of TCF as the key pillar supporting its new regulatory structure.

I do not believe that for a second. Doing away with or weakening TCF actually means the RDR will lose one of its own main supports – not the other way round.

Nic Cicutti can be contacted at


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There are 29 comments at the moment, we would love to hear your opinion too.

  1. The FSA may have produced a lot of text on its website about TCF but, from what I’ve seen of it, it seems mostly to be nebulous guff that offers little in the way of useful guidance as to what might constitute practical implementation. My impression was that that the person/s charged with writing it all didn’t have much idea of what they were supposed to be trying to get across and, as a result, just cobbled together whatever they could think of, hence the nickname Trying To Catch Fog.

    When you think about it, TCF might best be defined by setting out a range of examples of practices that do NOT constitute treating customers fairly. The most obvious example of this is fobbing off complaints, and we all know which sector has the worst reputation for doing that. Hence the vast majority of unsatisfactorily handled complaints that end up being referred to the FOS are attributable to the banks whilst the proportion attributable to IFA’s is now 2% or less. Again we see a regulatory initiative that is neither proportionate or appropriately targeted towards the areas where it is most needed.

    How about the FSA setting out some specific examples of good TCF practice? A good example might be that letters of recommendation, including costs, must be supplied to prospective clients at least a week before the presentation of any application forms, rather than being churned out as an irksome post-sale compliance chore. Clients must be given a clear outline of what they can expect in the way of ongoing service in return for trail commission is proposed (in the case of the banks, which offer no ongoing service, this will be difficult, and rightly so). Clients must be told who their point of contact will be for future enquiries. Again, a difficult one for the banks as, once the sale has been done, the “adviser” commonly disappears from view and cannot be contacted no matter how hard the client tries, even to the point of ignoring requests for a return call. That’s not TCF.

    But never mind, the RDR will sort everything out and we’ll all live happily ever after ~ not.

  2. <>

    Firstly you have to understand why and accept that reg-yew-lay-shun as practiced by the Failed FSA is the problem, not the solution.

    Next you have to look at TCF as part of this failed philosophy. TCF is juvenile, because ‘fairness’ in the real world is a juvenile concept based on subjectiveism. A better monicker would have been Treating Customers Equitably. Equitable means fair and just.

    And this is important. The vast bulk of the stuff coming out of the failed FSA is not equitable at all (RDR for example). Equitableness puts responsibilities on both sides of any transaction – not something favoured by the client state Fabians and their financial services cheerleader – the failed FSA.

    So good riddance to TCF – it was pointless and pathetic and subjective. And cutting it undermines the inequitable RDR. Excellent.

    To comment on the various product and dsitribution errors called up by Cicutti, these are again because of regulation – not despite it. If you stangle the profitablity of businesses from their traditional business lines they look for something else. If you then pump lots of underpriced money at them and keep interest rates artificially low you end up trying to make things that exploit this opportunity and try to help clients income requirements at the same time. The moment sound money returns all these schemes go pop.

    In regards to things done by banks, well what do you expect from a state sanctioned cartel with special privilige? (BTW Where do both Blair and mandleson now get paid squillions – banks).

    Furthermore no market is perfect al the time. By definition there will be good and bad advice. In my FS lifetime I have witnessed a general improvement (independent of FS regulation) but as far as understanding basic economics goes there remains woeful ingorance – especially at the Failed FSA.

  3. I’m still eager to hear an explanation from the FSA as to why mis-sellings of PPI on such a mass scale was allowed to happen during TCF implementation?

    Whilst all IFA firms have been busy getting their clients to fill in tedious feedback forms and sending them reams more paperwork to try and satisfy the extra regulatory burdens, what has been the outcome for the banks?

    This double standard of the appliance of regulation regarding TCF as with most things has made the IFA community have little respect or regard for the present regulator.

    Speaking to an IFA who is nearing retirement, who serves the same rural communities I do and one of life’s gentlemen… his statement to me was quite correct – “If you live and do business around here, you have no choice but to treat customers fairly. If you didn’t you would have no business”
    The FSA have failed to understand that most IFAs these days have an enforced self regulation, if they needed it.

    As the IFA said..”What the FSA fails to understand is that many of us genuinely care about our clients, we’ve already been applying adviser charging over many years because we charge no more for example than 3% + 0.5% trail on whatever investment/pension product we’ve recommended to them”

    Sadly John is retiring a year earlier, leaving one adviser in the firm, as the others have retired already to service 2,000 clients!

    RDR qualification deadlines and just the ridiculous costs and onerous compliance burden is culling off thousands of IFAs, which in itself is hardly treating customers fairly.

    Driving home yesterday I heard Andrew Tyrie saying that common sense had prevailed regarding “the payment council” and the abolition of cheques, because they’d lost sight of carrying out edicts that turned out to be not in the interest of the consumer.

    The payment council had to listen, it’s a pity that Hector Sants and his co-horts simply refuse to pay heed to anyone.

  4. When is the regulator going to stop trying to micro-manage our businesses and leave us alone to look after clients. TCF is not something the regulator dreamed up it is what many of us have been doing for generations, I for one will continue my own TCF and retain my clients trust and friendship untill and after retirement! Unfortunatly RDR will destroy trust in the IFA sector and generally in financial services.

    Well done FSA you are achieving the opposite effect to your stated mandate.

  5. TCF is fine. It’s what everyone should be doing anyway, for the most part.

    But the penalties for non-compliance aren’t anywhere near harsh enough – the banks (in particular) and the less scrupulous ‘advisers’ know all too well that a few thousand complaints here or there and maybe a piffling fine isn’t really any obstacle to raking in massive profits from their ‘sales’ teams.

    The regulator should adopt a “comply or die” attitude: employ a Judge Dredd figure with authority to exact vengeance on pushy bank managers and bonus-hungry execs, on behalf of beleaguered consumers as well as overburdened IFAs.

  6. TCF should never have been formalised. It is common sense and good business practice. If we need to ‘teach’ TCF it says a lot about our industry. Sad !!!!!

  7. FemaleIFA @11.03

    “Speaking to an IFA who is nearing retirement, who serves the same rural communities I do and one of life’s gentlemen… his statement to me was quite correct – “If you live and do business around here, you have no choice but to treat customers fairly. If you didn’t you would have no business”
    The FSA have failed to understand that most IFAs these days have an enforced self regulation, if they needed it.”

    Quite. Markets trend to spontaneous order (and are entirely self regulating). Bureaucrats trend to chaos.

  8. FSA, TCF, RDR all perferctly flawed (if such a thing can be said)
    FSA – Too complicated, Top Heavy with thousands of jobsworths on a gravy train of excessive salaries and expense accounts no one audits. Not accountable to the people who pay its fees, dismissive of the concerns of practitioners and parliaments TSC, arrogant leadership who do not give a tinkers curse about the practitioners it was meant to serve and assist and has never put consumer interests at the forefront of its thought processes, otherwise we would never have had the most recent Keydata as it should have been prevented in 2007 when they knew KIS risk factors were being misrepresented to the public and advising community.
    TCF- just a load of gobbledegook nonsense
    RDR – another screw up which will see the departure of thousands of advisers from this industry, the banks have already started the process and has no consumer benefits as it takes away consumer choice as to how they pay for advice and services.
    The FSA is an organisation which does not serve its subscribers well.

  9. My daughter’s friend (almost fresh out of university) got a job with the FSA and was making TCF calls to IFAs, telling them what they should be doing???
    Go figure.

  10. @ Anonymous 12.00pm

    You don’t need to have many years experience as an IFA or in the financial services sector to interpret and apply rules.

    There is an attitude within certain sections of the IFA world that beleive that experience counts for everything. Look at RDR – If an advisor, as many IFAs like myself have done, has been doing their job properly over the years then they should have no gripes about getting the extra qualilfications. I can accept that it can seem insulting and that it seems to question an individual’s experience – but why worry? It should be a doddle.

    People should not be so quick to discredit education.

  11. I have failed to find even one instance of a bank employee attending a TCF roadshow, can anybody shed light on this?

  12. Nic, The majority of IFAs’, have always treated their customers fairly. Most of them live and work next door to the people they have as clients. Word of mouth and not slick advertising is how they get new business.Satisfied clients come back for more.
    The only difference with the FSAs more formalised TCF approach was that IFAs’ had to document it and tick all the boxes so beloved of our dear regulator.” If it is not written down, it did not happen

    Complaint trends are hard to spot in an IFAs practice, two or three complaints over a whole career span hardly merits in depth analysis.
    The clients of IFAs’ will be no worse of for the fact that the death blow, as you like to put it, has been struck
    Pity the same cannot be said of the banks customers.

  13. To banks TCF was a tick box exercise anyway. It never stopped them misselling a product as recent events have shown once again, as long as the target is hit that’s ok. The adviser and manager will havehit their target, collected their bonus, and moved on anyway by the time the S**t hits the fan and the company will pay out centrally. TCF pah !!!!

  14. Re Anon @2.07
    Same MO as the FSA?

  15. Just how much did it all cost? Workshops, ‘processes’, I remember Sesame stating in the press about hiving off tens or hundreds of thousands to ‘implement TCF’ – all ultimately paid for by the consumer. And just how much did the consumer benefit? Nic, I assume you keep your articles on PC / MAC, sadly this will probably save you some time in seven or eight years when you will be able to substitute ‘TCF’ for ‘RDR’ as the latest originally well intentioned but disastrously implemented and costly idea goes the same way. Paid for by the consumer, again….

  16. Re Anonymous 2:50pm

    Can you explain what you mean by “paid for by the consumer” please?

  17. Oh no they can’t take TCF away now!!! After 10 years I just managed to understand partially what the FSA were on about. I don’t want to have re-learn another set of pointless red-tape rules that are manufactured by donkeys in ivory towers trying to justify their jobs handed to them through the old boy network.

  18. Suggestions that TCF is dead and buried may be a litlle premature. Certainly now going to be much lower profile but gone forever? I doubt it-it is too big a stick to beat everyone with for the school bullies to forsake completely.

    Besides which it was not all one way. We managed to get a provider to change their mind (in connection with an MVA being applied to a transfer) by writing them a letter of complaint which copied in the FSA under the TCF regulations. And the lady at the FSA who we spoke to was very helpful and as delighted as we were at the outcome.

    And when was the last time you were in the hospitality box at Tottenham Hotspur? And as an extra bonus, you didn’t have to watch Tottenham playing….

  19. Anon 12.51
    “People should not be so quick to discredit education”
    a few spelling lessons would not go amiss in your case.
    But then you do not need to be able to spell to be a good adviser.
    Just as you do not need to have a degree in child psychology to be a good dad.

  20. well well well, the whole crock of s h it is now exposed for what it is, badly laid out ideas and concepts by a badly misinformed regulator with the professional commentators (Cicuttis etc) and trade bodies all now franticallly finding a way of distancing themselves from the impending collapse. Where were they when the ifa community needed defence. Answer: attacking them! Some of these guys should buy a mirror and look into it for some soul searching.

  21. IFASteve.

    To explain how ‘consumers’ pay for everything. Or properly how the wealth creating owners and employees in private business pay for everything, since all state employees including especially the FSA are ‘tax consumers’.

    “Economies consist of people and things. Governments and companies are just convenient administrative fictions by which we seek to better organise our lives”. Hence all wealth comes from private business and the likes of the FSA are unproductive leeches.

  22. Like with all industries, sometimes the only way to assess an individual’s competence and motives is by experience. I deal with personal referrals. I put my heart and soul into every client and always think outside the circle, even if it sometimes doesn’t really involve “financial advice”. You either care about your clients or you care more about your bank balance. I assume its easier to be more caring away from the glitzy lights of the metropolis. I don’t need TCF, compliance or any FSA directives to tall me how to do my job and what is right from wrong. Lets go ack to the old days. You stitch me up, I break your legs. That way we all know where we stand (or sit) so to speak.

  23. When TCF first reared it’s utterly pointless head, I thought it was a joke – literally; and so it has proven to be.

    Whilst the FSA were (and still are) mis-managing the banks (and for some conspiratorial reason ignoring advice given by bank advisers) TCF was introduced by some quango (who has probably never actually dealt with a ‘customer’) in an effort to clear their corporate conscience.

    It is quite OBVIOUS that you need to treat customers fairly, otherwise you wouldn’t be able to grow your business.

  24. George Williamson 28th August 2011 at 9:56 am

    The FSA applies TCF in different sectors in different ways. As most FSA staff will have either have worked in a bank/insurance company (and not an IFA/Morgage Brokerage) or will leave to do so – they apply “Treating Customers Flippilantly”

  25. Anonymous
    FSA stooge.

    Are you really trying to tell me, some wet-behind- the ears- freshfaced- graduate without a modicom of business experience is the right recruit to go TCF checking.

    What a load of flatulence you speak

  26. To Andrew Mallett – you’re absolutely right ! An honest adviser who wants to stay in business and has a genuine concern to help people doesn’t need a bunch of half-wit civil servants to tell him how he should treat his clients. In any case, thick volumes on TCF will not stop the rogues.

    It is possible to make a decent living without ripping off clients – when clients know that they are getting good advice and not being excessively charged for it, they will return in the future and recommend their friends and relatives. So treating customers fairly is just good business sense – only the FSA could come up with the idea of writing a vast amount of gobblygook to formalise (in the minutest detail) what the concept should involve.

    Still, it kept a few more people off the jobless register for a time.

  27. TCF is and always was a “RED HERRING”

    The FSA was sporned from Labour’s & Mr Brown’s school of leadership bulling and to kick you dog to heal.

    TCF visits were an exuse for file checks and to administer 166’s or skilled persons reports and send a strong message of fear through the IFA ranks and to get rid of as may IFA’s as poss.

  28. What planet are you all on?

    Where is the evidence that the FSA has cancelled TCF. Cancelling a few roadshows is hardly a death sentence.

    Before you all get too excited, remember TCF has been with us since the dawn of the FSA.

    Principle 6 states;

    Customers’ interests A firm must pay due regard to the interests of its customers and treat them fairly

    Maybe the change is because the FSA expect TCF to be fully embedded and part of business as usual now.

    Regardless of why and how, you will still be expected to be able to show that you are treating your customers fairly.

  29. Having to treat customers fairly? Where does that fit in with 7% commission??

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