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Treating Customers Fairly

"Treating Customers Fairly (TCF) is a key issue on our agenda and I know from experience that TCF has caused companies to change their behaviours and place the customer at the centre of everything they do. I expect us to be one of the leaders in this area." Trevor Matthews, Chief Executive Officer, Friends Provident

• What is TCF?
• What the FSA is trying to achieve (the six outcomes)
• What the FSA expects
• Who is the customer?
• The TCF assessment
• Summary

What is TCF?

The Financial Services Authority (FSA) is an independent non-governmental body that regulates the financial services industry in the UK. The FSA is accountable to Treasury Ministers, and through them, to Parliament.

One of the FSA's Principles requires that: 'A firm must pay due regard to the interests of its customers and treat them fairly.'

In 2001 the FSA launched their Treating Customers Fairly initiative to help restore customer confidence in the financial services industry and to create a fairer and more effective financial services industry.

This was followed up in 2006, when the FSA published a set of six consumer outcomes * to help firms think through what TCF means in practice - "Treating Customers Fairly - Building on Progress".

The FSA has made it clear that it does not expect to produce detailed rules for TCF, and is looking to firms to decide how they will treat their customers fairly and expect TCF to be built into firms' strategy, culture and operations.

*external site

What the FSA is trying to achieve (the six outcomes):

The objective is to create a fairer and more effective financial services industry.

To achieve this, the FSA published six outcomes in 2006, which are the ultimate criteria of TCF.

If the outcomes are being achieved then, from the perspective of the FSA, customers are being treated fairly.

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 both 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.

What the FSA expects:

Most firms in the financial services industry already aim to treat their customers fairly.

However, the industry regulator, the FSA, wants to take this further and challenge firms and their ways of doing business against TCF principles.

The FSA expects all distributor and provider firms to effectively embed TCF into their values, culture and the way they conduct business. This includes:

• Understanding how TCF applies to the firm's business and its target customers
• Embedding TCF into the firm's strategy and culture
• Ensuring that TCF has been delivered at every level of the firm
• Reviewing the firm's performance against its TCF obligations, and addressing any shortfalls.

In specific terms, firms are expected to take account of the following aspects:

• The design and governance of the product
• Identifying the right target market for the product
• The marketing and promotion of the product
• The sales and advice processes
• The provision of post-sale information to the customer and the complaints process.

In order to help with this, the FSA have provided firms with the six outcomes (listed above).

Who is the customer?

TCF defines the customer as the end consumer - the person who buys or uses a product from a distributor or provider. As such, every distributor and provider company is responsible for making sure that their customer is being treated fairly throughout the lifetime of the product.

The TCF assessment:

The FSA is expected to carry out assessments of distributor or provider firms to establish whether they are complying with the principles of TCF.

Summary

Friends Provident is fully committed to the principles of TCF.

We are embedding TCF into all aspects of our business to ensure that the whole product and advice process is fair and clear at all times to our customers throughout the lifetime of their policies.   

Information correct as at 4 August 2009.