04 Oct What is TCF? | Are we Treating Customers Fairly?
Treating Financial Service Customers Fairly
“Treating Customers Fairly” (TCF) is an outcomes-based regulatory and supervisory approach designed to ensure that specific, clearly articulated fairness outcomes for financial services consumers are delivered by regulated financial firms. TCF aims to raise standards in the way firms do business that will benefit the customer and increase their confidence in the financial services industry.
In effect, the TCF aims to achieve six key outcomes for consumers:
- Customers can be confident they are dealing with firms where TCF is central to the corporate culture;
- Products & services marketed and sold in the retail market are designed to meet the needs of identified customer groups and are targeted accordingly;
- Customers are provided with clear information and kept appropriately informed before, during and after point of sale;
- Where advice is given, it is suitable and takes account of customer circumstances;
- Products perform as firms have led customers to expect, and service is of an acceptable standard and as they have been led to expect; and
- Customers do not face unreasonable post-sale barriers imposed by firms to change product, switch providers, submit a claim or make a complaint.
Firms are expected to demonstrate that they deliver the above outcomes to their customers throughout the product life cycle, from product design and promotion, through advice and servicing, to complaints and claims handling – and throughout the product value chain.
TCF does not mean creating satisfied customers; a satisfied customer could still be treated unfairly and not know it. Also, TCF does not mean that every firm must offer an identical level of service; and TCF does not mean that regulators have the final say on which products consumers should want or be sold. Finally, TCF does not mean that customers are no longer expected to make decisions or take responsibility for them.
Achieving a Fair Deal for Consumers
TCF is relevant to all firms who are involved in the retail supply chain, whether or not they have a direct interface with the customer, and whether or not they are involved in all stages of the product life-cycle. This includes firms providing services as well as those producing or selling products.
‘Provider’ firms that are not ‘end-distributors’ (in other words they are not directly selling products to or advising customers themselves) still need to consider their impact on the end-customer. The requirement on firms to treat their customers fairly is not new. It is firmly rooted in several regulations and initiatives across the world.
TCF is also central to the delivery of an overall work in the retail market. Regulators work to achieve this through a focus on:
- Capable and confident consumers;
- Simple and understandable information for, and used by, consumers;
- Well-managed and adequately capitalized firms that treat their customers fairly; and
- A risk–based and proportionate regulation.
TCF is related to all of these. The current level of consumers’ financial capability has an impact on the regulators approach to TCF. The provision of simple, understandable information is a key element of TCF, which is in fact a key component of the risk-based approach to regulating firms.
To conclude, TCF is about a culture – firms need to continue to focus on TCF and to progress towards embedding TCF throughout their activities. Inevitably, cultural change takes time. More widespread changes in outcomes as well as processes will come with time, which will require sustained effort and leadership from senior management.
What does MiFID II do?
Of most interest to financial services are the provisions that enhance the quality of authorisation and conduct of investment firms, by imposing greater prudential requirements in terms of management bodies, systems and controls, and greater investor protection requirements, in terms of categorisation of and disclosures to clients, product governance and treating customers fairly. Find out more from our expert international speaker Adam Samuel