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The TCF chimera

TCF is a strange beast but advisers must be brave enough to grapple with it

When Prince Philip was opening Vancouver City Hall in Canada, he remarked: “I declare this thing open, whatever it is…” The FSA seems to suffer from a similar state of confusion when it comes to implementing its treating customers fairly directive.

TCF certainly exists but how exactly it is determined and enforced has created some confusion within the walls of Canary Wharf as well as the wider financial services marketplace.

The Information Commissioner decreed last week that the FSA must name and shame advisers who performed badly in a mystery-shopping exercise designed to expose those firms operating counter to the directive. Far from welcoming this development, the regulator is appealing against the decision, saying disclosure could endanger the commercial interests of advisers who are mystery-shopped.

At the same time, the FSA warned last week that firms must increase the pace of progress in embedding TCF if they are to meet next year’s deadlines. It warned of additional regulatory intervention if the deadline was missed. So why is it being so reticent in rebuking those firms that are dragging their heels about implementing TCF? If such a course of action results in some commercial damage to those firms, then good. Being hit in the pocket is the only language that some will understand and if that is what it takes to bring them into line with the practices of the rest of the market, then so be it.

There is a sense that TCF, in itself, defies strict definition. This may be why some practitioners are having difficulty getting to grips with the concept. What is not in dispute is that TCF breaches now feature in 40 per cent of all fines imposed by the FSA, up from just 11 per cent of fines in the previous year, according to research by City law firm Reynolds Porter Chamberlain.

The whole point of TCF is that it forms the vanguard of principles-based regulation as distinct from the old codified regulation. It was in December 2006 that the FSA announced plans to move to a more principles-based approach.

In April, the FSA issued a handbook, Principlesbased regulation – focusing on the outcomes that matter. It concentrated on principles and outcome-focused thinking, rather than detailed, prescriptive rules prescribing how outcomes must be achieved.

One result is that firms now have much more flexibility in how they achieve their objectives. The FSA feels that this new environment will foster a more innovative and competitive financial services industry. That remains to be seen. For some, this leeway appears to have resulted in lethargy. What is in no doubt is that by March 2008, firms must have appropriate management information measures in place and by next December they must be able to demonstrate to themselves and the FSA that they are treating their customers fairly.

This may be seen as a problem for an industry that is based largely upon products containing definable terms and regulations and often capable of being tick-box compliant but this should not be used as an excuse to ignore or put off implementing TCF priniciples. Adopting a state of denial is cowardly and unprofessional.

Let’s face it, everyone knows when they are treating customers in a fair manner and when they are not. Anyone in any doubt should throw in the towel and become an estate agent. To treat a customer fairly is to offer a product or service that you believe, based on your professional knowledge and skill, will meet the demands and needs of the client. That’s not too much to ask, is it? It is all about being professional.

Raising professional standards will boost consumer confidence in the industry and that will ultimately encourage more people to seek advice. Firms that recognise the benefits of professionalism will be the most profitable as we move into a new era and it is the only way forward for long-term prosperity.

As an industry, we must stand up and say what we actually believe in and that must start with being up-front and courageous in implementing a robust business strategy that embodies everything encompassed within treating customers fairly. Firms that grasp the opportunity to affect real cultural change both within their organisation and the wider financial services sector will enjoy long-term rewards.

Simon Burgess is managing director of


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