Treating Customers Fairly

Be Positive

I had a very interesting exchange of emails earlier this week from an IFA in the North West. Initially the tone of his email was a little abrasive as he chastised me for scaremongering and went to great lengths to point out that his firm had an excellent visit from the FSA last year and have fully embedded TCF. Initially I was taken aback, particularly as he insinuated that I was unprofessional and called me a "supposed assistant gamekeeper".

Before sending a response I went through a number of options. Should I simply ignore this man who simply doesn't understand me? Should I tell him where to get off and ask him to kindly mind his own business? (although attractive, I decided that this option would be a little hypocritical as I am writing a public Blog).

After much thought I realised that he may have a point. In my desire to reach the 87% of Advisers who missed the FSA's March TCF deadline, I overlooked the fact that a growing number of Firms have already made the necessary changes. In fact, some firms probably didn't need to make any changes at all. The FSA themselves expect that 80% of firms will have achieved the required standard by their December 2008 deadline. That's a higher percentage than the number of people who pass their driving test first time and oddly enough we don't name and shame the 20% of non first time passers.

So I replied to my correspondent with an apology. In my drive to reach the Firms who aren't yet up to speed I was in danger of alienating those who have. I was becoming less of a "supposed assistant gamekeeper" and more of a "supposed financial journalist" concentrating on the negatives rather than celebrating the positive work that has been done and the added customer focus that TCF has brought.

A number of emails were exchanged and I believe that from an initial shaky start I may have made a new friend? We will see what he says when he reads this!

And from all of this I have been reminded that it is not all doom and gloom. Yes, some firms still need to do a great deal of work to achieve TCF Compliance but for others the focus needs to be much more about how they can best communicate the good things they have done when the FSA get in touch. 

What happens next?

So, we now have enough information and feedback from the first round of engagement from the FSA in the North West to know how the process will work across the country. The Regulators campaign plan thus far is as follows:

1. TCF Letter - This is "First Contact" and invites the Firm to attend a TCF Roadshow.

2. TCF Roadshow - All Firms who receive the letter are expected to attend the roadshow. Anecdotal evidence suggest that failure to attend the roadshow causes a Firm to receive greater scrutiny later in the process. During the roadshow the FSA runs round table discussions and case study exercises to explain the principles and goals of TCF.

3. TCF Assessment - All Firms who are asked to attend the roadshow then receive an assessment a few weeks later. This is conducted as an interview with the Firm's Principle, lasts about an hour and takes one of three forms: a. Telephone Interview; b. Face to Face at a central venue; c. Face to Face at the Firm's Office. During the interview the Adviser will be asked a series of questions designed to enable him or her to demonstrate that TCF has been successfully implemented. So far the feedback that I have received from about 40 Firms suggests that the telephone interview is the least pleasant experience simply because it is more difficult to communicate the complexities of Leadership Principles and TCF over the phone.

4. TCF Validation Audit - 25% of all Firms will receive an on site validation audit. Early feedback indicates that these can be in depth. I was contacted by a Firm who had their visit last week. The FSA Auditors were there from 9:30 am to 7:10 pm. They checked 10 client files, audited the MI data and T&C data and interviewed the Principle. Although this was not an unpleasant experience for the Firm in question it does demonstrate that TCF is being taken very seriously by the Regulator.

I am attending a TCF validation visit next week so I will be able to feedback on this experience in a later post.

The FSA TCF Roadshow

The FSA have already reminded the industry that TCF must be implemented in spite of the difficult financial conditions faced by Brokers. As the FSA caravan trundles around the UK the key watch word has to be engagement. The initial letter that each firm receives prior to the FSAs arrival states that in no uncertain terms firms are expected to engage in the process. The first stage of the process is the Roadshow. All firms in a particular area are invited to the roadshow. Every firm is expected to attend. Of course going to the roadshow doesn't necessarily keep you off the FSA radar but it certainly doesn't put you on it, waving a flag and shouting "look at me, look at me" as non attendance might.

I will cover more of the roadshow content in a later post but if anyone who has attended one of these events has a view I would like to hear from you.

The ostrich mentality is not a successful defence in this latest round of Regulator scrutiny. If you engage with the FSA you are likely to find that they are helpful and willing to listen to your practical experiences of embedding TCF. If you do not engage they could morph into a terminator style pursuer with a relentlessness the like of which has never before been seen in the industry.

TCF Visit Drill

EQI Consultancy have developed a series of Drills and Audits relating specifically to TCF. The first of these is the TCF Visit Drill.

EQI Consultancy have prepared a half day TCF Visit Drill which is designed to simulate an FSA TCF Visit. Don't worry, there are no role plays, ou will simply be asked the questions that you are likely to be asked and they will talk through your responses. Clients who have already completed this have found it to be highly valuable and a great way to boost confidence and prepare for a visit.

TCF Visit Drills are charged at £250 +VAT and as they are proving very popular are available on a strictly first come first served basis.

To book a TCF Visit drill: http://www.eqionline.co.uk/index.php?substance=contact&substance2=contact&header=home

Mention Treating Customers Fairly Blog and receive a £50 discount.

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Where's Wally?

The Where's Wally area will help you to keep track of the FSA as they move around the UK on their TCF visit schedule. All small firms will be contacted by the regulator over the next three years so keep up to date with their whereabouts - Where's Wally?

Currently: North West      Next: Midlands and South West

A word from the FSA

In this section I will be bringing you a regular update on what the FSA are saying and thinking. July has been a busy month with record numbers of firms being fined or banned. In amongst all of this, the regulator has had time to publish a number of update reports including this one:

The Financial Services Authority has published its latest update on firms’ progress towards the December deadline for demonstrating that they are consistently treating their customers fairly.

The March interim deadline required firms to have management information (MI) in place to test whether they are treating their customers fairly. So the latest FSA assessments focused on whether firms had adequate MI rather than assessing whether customers are being treated fairly in practice. Of the sample firms assessed, a minority (13%) met the March deadline – but many have invested significant time and energy working to measure TCF, and the FSA believes that, with a substantial, continuing effort, approximately 80% of the sample are still capable of meeting the December deadline.

Sarah Wilson, FSA Director, Treating Customers Fairly, said:

“Having appropriate MI or other measures in place puts firms in a position where they can measure the quality of the outcomes they are delivering for consumers. These results show that adequate MI is not yet fully in place in the firms assessed – it does not mean that they are treating their customers unfairly. However, we now expect all firms to maintain their momentum and to undertake a significant amount of further work to meet the December deadline of demonstrating that they are consistently treating their customers fairly.”

The FSA have published further material illustrating good and poor practice at:

http://www.fsa.gov.uk/pages/doing/small_firms/general/tcf/report/index.shtml

So, the Christmas countdown begins for more reasons than one this year.

What is Commercial Compliance

Maybe we should start by defining Compliance. Many industries now talk in terms of compliance, many industries have an over arching regulator. Our industry, that of Financial Services is possibly one of the most regulated in the history of the modern World. It wasn't always the case. Once upon a time it was possible to set up as a Financial Adviser in one format or another in less time than it takes to watch the an Brit lose a close five set match at Wimbledon. Today there are real exams and regulation that take time and effort and cost money.

Our regulator, The Financial Services Authority has taken a few years to find it's feet but now it is really getting to grips with the industry, delivering new initiatives, special projects and real enforcement. Penalties for failing to meet the standard are high and heavily publicized hitting both the pocket and the reputation of those who flout the rules.

For many years compliance has been seen by many as a barrier to creating wealth. Many times I have heard an organization's compliance team referred to as the business prevention unit, often reveling in returning a failed file to an Adviser and preventing business being processed.

For more than 10 years I have been working with organizations to embed regulatory compliance into their business that not only enables them to conform to the rules but more importantly allows them to use the rules to enhance their customer proposition and their income.

Compliance can and should be used as a tool to generate greater income, stronger customer relationships and a level of professional standing never seen before. Each new FSA initiative should be seen as an opportunity to lift your organization above the competition and develop the commercial edge that  sets you apart.

Blog Mission Statement

The purpose of this Blog is to act as a resource to everyone who works in the UK Financial Services Industry. It will collate information from multiple sources, generate debate and feed back to all contributors. It will show that Compliance can be Commercial.