Recently, the Financial Conduct Authority (FCA) sent a Dear CEO letter to banks reminding them about their obligations to treat corporate customers fairly.
The letter raised concerns flagged to the regulator about the way that some corporate customers were being treated during the coronavirus pandemic. This blog looked at it in detail, and the implications for banks.
The reminder to firms to abide by the regulator’s TCF rules seemed a timely opportunity to revisit those requirements in more detail. In particular, it’s a good reason to look at the 6 ‘consumer outcomes’ that the regulator expects to result from firms treating their customers fairly.
What are these consumer outcomes? And what should you do to ensure your firm can achieve them?
TCF – a big focus for the FCA
The fair treatment of customers has long been a priority for the financial regulator. In March, the FCA shared details of its work to ensure the fair treatment of vulnerable customers.
Treating customers fairly – the FCA’s six consumer outcomes
Underpinning the TCF guidance are six consumer outcomes that the FCA states ‘firms should strive to achieve to ensure fair treatment of customers’. These outcomes are:
- Outcome 1: Consumers can be confident 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 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 can your firm do to embed these outcomes in your financial promotions and operational processes? The good news is that there are some fairly simple steps you can take to improve your chances of achieving the FCA’s desired outcomes.
Outcome 1: Consumers can be confident they are dealing with firms where the fair treatment of customers is central to the corporate culture.
This is a core aspect of the FCA’s approach. The regulator is looking for firms to develop cultures where good governance is inbuilt, something we looked at recently in our blog on developing purposeful cultures.
Doing this means putting compliance at the centre of your processes; getting your processes up to scratch and ensuring compliant financial promotions, by making the necessary reviews, approvals and audit trails compulsory. Read tips on how to achieve this in How to implement a culture of compliance.
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.
Creating financial promotions that are relevant to your audience will get you another big regulatory thumbs-up. As we mentioned above, this is particularly the case with vulnerable consumers. Any misleading promotions are likely to be met with fines and the enforced removal of ads and other materials.
Outcome 3: Consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale.
The FCA has a number of tactics it can employ to challenge unfair and misleading promotions. It has clear rules about financial promotions compliance, many of which are focused around fairness and clarity.
Marketing, advertising or sales material has to be clear, fair and not misleading. After-sales communications also have to meet strict requirements. Any time you interact with customers or prospects, your approach needs to be compliant.
To achieve this, make sure your Compliance team review and approval processes are robust, so no unapproved promotions slip through the net. Automation and innovation and regulatory technology can help here.
Outcome 4: Where consumers receive advice, the advice is suitable and takes account of their circumstances.
Products and services need to meet the FCA’s standards on suitability; you can read tips on improving the suitability of your firm’s financial advice here.
Outcome 5: Consumers are provided with products that perform as firms have led them to expect, and the associated service is of an acceptable standard and as they have been led to expect.
Partly, of course, this outcome relies on product performance, and the robustness and market-worthiness of your solutions. But it also has relevance to financial promotions.
Your promotions need to include the relevant risk warnings and disclaimers – something that can be a bit of a lottery, as this blog explores. These warnings will set consumer expectations about the way your products have performed. They need to meet strict requirements on prominence to make sure they cannot be easily missed.
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.
We covered this in a blog on mortgage switching earlier this year, just one area where the regulator is keen to see fair treatment of existing customers. Converting your client care promises into action is essential here to ensure your post-sales communications are as compliant as your financial promotions.
Achieve the FCA’s TCF outcomes
The regulator’s consumer outcomes are not difficult to achieve, if you put in place robust procedures, make compliance approvals processes mandatory and put compliance at the heart of your organisation’s culture.
As we mentioned above, automation can be a huge help when it comes to mandating Compliance team approvals and compliant processes around your financial promotions. You can read more about how automating your processes can optimise regulatory compliance, as well as saving money and improving efficiency here.
How can we help!
LS Consultancy has wealth of experience in reviewing financial promotions and can do so on a one-off or on an on-going basis.
Remember: Not everything is black and white when it comes to Financial Promotions, and many of the rules are open to interpretation. If you are unsure how your activities fit within the rules, please contact us.