Treating Customers Fairly

Simon Morris – PartnerJean Price – Head of Retail Banking and Consumer Finance

1st October 2008

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Covering…

TCF in a nutshell

FSA’s agenda

What is TCF?

What should have been achieved so far

Making sure your TCF MI project meets its

objectives

Some sectoral issues

Hitting the target – what firms need to show

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1. TCF IN A NUTSHELL

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TCF in a nutshell

The timetable

The route

The stance

The review

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1. The timetable

You now receive MI to test if you are

– consistently TCF and

– achieving the six customer outcomes.

By 31 December 2008, this MI will show you

are TCF

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2. The route

1. Look at your business

2. Identify the relevant Outcomes

3. Have a plan to deliver on them

4. Establish an MI measurement mechanism

5. Look at what this tells you

6. And jump at it

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3. The stance

Deadlines non-negotiable

Market conditions no excuse

Needs energy & commitment

FSA is assessing relationship managed firms & acting …

– Board presentation

– VoP

– RMP

– Remedial work

– ENF

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4. The review

What does FSA ask about?

What will FSA want to see?

What if FSA is unhappy?

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What does FSA ask about?

FSA will want to assess

– How have you embedded?

– How have the gaps been closed?

– How are you performing under the T/T?

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FSA will want to see …

Tangibles

– Complaints

– Communications

– Product governance

Intangibles

– Management

– Staff

Governance

– Gaps closed?

– QA?

– Audit trail?

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And evidence of …

Workings of the TCF committee

– Minutes

– Communications

– Champion

– Resources

– Plan

– QA

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And if FSA’s unhappy …

Watch list

Greater supervisory contact

Referral to ENF

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2. FSA’S AGENDA

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FSA’S AGENDAThe move towards more-Principles based regulation

TCF must be an integral part of the business culture

Conversion of good intentions into actual consistent delivery of the six consumer outcomes

Demonstrate TCF by December 2008

Cultural change => tangible customer benefits

Threat of enforcement action

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What does the agenda mean in real

terms?

No formal baseline

A “stealth rule”

– Not in the Handbook

– No consultation

– No cost benefit analysis

– A lot of guidance

Changes in business culture

Full engagement of senior management

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TCF – the bibliography

1. Cultural framework –Progress Report (5.07)

2. Product design – TCF (7.07)

3. Management information –TCF (7.07)

4. Culture – TCF (7.07)

5. Providers & distributors –PS07/11 (7.07)

6. Wrap platforms – DP07/2 (9.07)

7. Measuring outcomes – web pages (11.07)

8. Retail fund managers –

FS08/1 (1.08)

9. PPI – Sarah Wilson

(12.2.08)

10. With-Profits funds – Clive

Briault (27.2.08)

11. Wholesale customers –

Sarah Wilson (15.4.08)

12. Consumer contracts –

Fairness of terms (6.08)

13. MI and good practice –

Progress Update (6.08)

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3. WHAT IS TCF?

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WHAT IS TCF?

A series of values

That firms must apply

To generate overriding standards and

To deliver the six consumer outcomes

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What is the “series of values”?

Giving consumers the confidence that they are dealing

with a firm where fair treatment of customers is central to

the corporate culture

Marketing and selling products that are designed to meet

the needs of and are targeted at identified consumer

groups

Providing clear information and keeping customers

appropriately informed before, during and after sale

Ensuring that advice is suitable in all the circumstances

Providing products that perform as expected and good

service

Making it simple to switch product, provider or make a

claim or complaint

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“Series of Values”?

Also known to you and me as

THE SIX CONSUMER OUTCOMES

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The Six Outcomes

Giving confidence

Design

Information

Advice

Performance

Post-sales

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But not just the Six Consumer

Outcomes…

Acting consistently

Acting contractually

Acting reasonably

Acting competently

Acting in accordance with the “fair treatment” Principles

– Principle 6: “A firm must pay due regard to the

interests of its customers and treat them fairly

– Principle 7: “A firm must pay due regard to the

information needs of its clients and communicate

information to them in a way which is clear, fair and

not misleading

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Applying the values

Must ensure that the six consumer outcomes are delivered

Must be fully embedded at all levels

Must cover every step of the consumer journey

Must be evidenced by good MI

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Generating Overriding Standards

Significant volumes of guidance from FSA on

what it considers to be appropriate standards in certain circumstances

For each firm to set its own standards

Gold-plating – pros and cons

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Achieving the six consumer outcomes

How are you doing it?

How are you evidencing it?

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4. WHAT SHOULD FIRMS HAVE

ACHIEVED SO FAR?

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What should have been achieved so far?

Specific actions identified

Senior management engaged

Gap analysis performed

Action plan developed

Work well underway – in particular firms SHOULD have met the standards required for the 31st March 2008 deadline by now

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Culture – FSA’s Challenge to senior

management

Leadership – TCF central to management

Strategy – TCF integral

Decision making – TCF key factor

Controls & MI – attuned to TCF

Internally – TCF communicated

HR – TCF key element

Reward – depends on TCF

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5. MAKING SURE YOUR TCF MI

PROJECT MEETS IT OBJECTIVES

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Making sure your TCF project meets its

objectives

What MI is required and what should it show?

Capturing MI

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What MI is required and what should it

show?

MI = evidence for management

MI = words as well as figures

– Embedded – staff

– Design – process & testing

– Information – survey

– Suitable advice – review

– Performance – analyse

– Post sale – track

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Capturing the MI

Assurance/action - compliance and management4

Initial analysis - evaluate and elevate3

2 Reports generated – the flow of management information

1 Process stages - your workflow

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6. SECTORAL ISSUES

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Some sectoral areas

With profit funds

– Surpluses

– Inherited estate

– Communications

CIS managers

– Identify market for the fund

– Control and manage distribution

– Review what is occurring

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Wholesale customers

– Deal directly

– Material impact

Consumer contracts

– FSA reviewing under UTCC

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Providers

– Determine market

– Stress test

– Monitor risks

– Chose distributor

– Train distributor

– Consider customer information needs

– Post sale responsibility

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And FSA is looking for in each area

What’s your system to hit the target?

Does senior management oversee and act on MI?

Is the result consistent with TCF?

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How can it be achieved?

Look at what FSA says are examples of good

practice

Robust testing

Ask the right questions – what will FSA ask?

Consider an independent review

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7. HITTING THE TARGET

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What firms need to show

Oversight and Approach

Specific examples linked to outcomes

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Oversight and approach

Senior Management Oversight

– MI packs closely aligned to the “shop floor” packs

– For each business unit, risks to the fair treatment of customers reflected in the risks management framework

– Challenging the data

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Embedding TCF within the business

Stategy and controls of firm to be consistent with fair treatment

Accountability - clear and at an appropriate level

of seniority

Ongoing improvement

Good examples of MI - clear presentation and easy to understand

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The Six Outcomes

What MI is required

Some practical examples

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Outcome 1 - Confidence

Senior Management MI

Senior management interaction with consumers

Monitoring involvement in promotion of TCF culture

Staff incentives and linking to quality checks

Staff feedback

Staff understanding

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Outcome 1 – Specific Examples

Senior management involvement

Training and competence

Staff feedback

Reward

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Outcome 2 - Design

Senior Management MI

Reports on fairness implications of product reviews

Investigating appropriate targetting – actual –v-forecast sales

Customer feedback

Intermediary and distributor feedback

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Outcome 2 – Specific Examples

Products designed to meet customer needs

Product targetting

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Outcome 3 – Information

Senior Management MI

Measure the clarity of information provided to customers

Measure activity of completeness and timeliness for post-sale information – is it up to standard?

Complaints and queries

Post-sales welcome calls

Intermediary feedback

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Outcome 3 – Specific Examples

Financial promotions

Quality of communications

Communications with intermediaries

Post-sales information

Post-sales checks

Complaints

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Outcome 4 – Advice

Senior Management MI

Independent quality checks

Mystery shopping

Analysing complaints and cancellations

Analysing portfolio trades

Identify potential commission bias

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Outcome 4 – Specific Examples

Quality of advice

Customer circumstances

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Outcome 5 – Performance

Senior Management MI

Does it do “what it says on the tin”?

Measure customers experience

What was the customer experience like?

Do the actual number of claims bear out the the expected claims?

Root cause and trend analysis of complaints

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Outcome 5 – Specific Examples

Ongoing monitoring of performance

Service Standards

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Outcome 6 – Post-sales

Senior Management MI

Surveys of successful and unsuccessful complainants

Analysis of post-sales service measures

Early exit penalities

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Outcome 6 – Specific Examples

Barriers analysis

Customer experience feedback

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And finally….

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TCF – Current Dialogue

ARROW assessment

“What does TCF mean for you?”

“Show me”

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So what should you be doing now?

13 weeks to go

See

Challenge

Analyse and monitor

Independent review

Act

Record

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ANY QUESTIONS?