Treating Customers Fairly (TCF)

Treating Customers Fairly (TCF)

Treating Customers Fairly (TCF) is significant and its impacts will be felt for some time to come. Why has it been introduced and how might financial services players best respond do it?

First, TCF is at the heart of the Financial Services Board (FSB) mandate to protect customers. If all providers were treating customers fairly in every interaction with them, the FSB would have done its job. Second, TCF enhances the powers of the FSB to respond on behalf of customers. Historically it has concerned itself mainly with the financial health of providers and it needs these powers to bat more effectively for the customer. Third, TCF is a critical part of the move to Twin Peaks. Under this model regulation will be split between prudential concerns, falling under the reserve bank, and market conduct issues, under the FSB. Finally, the philosophy of TCF provides an effective and flexible way to manage market conduct supervision.

It is this last point that should light the proverbial fire under every provider’s behind. TCF is managed around a number of outcomes, not a set of rules. If you don’t meet those outcomes – and it’s up to you to show how – not only will you find yourself in trouble now, but your competitors will mark the way forward and you may battle to keep up.

Providers, don’t be complacent. Lead from the front but effect the change of culture throughout your organisation. Set the benchmark for treating your customers fairly or others will and you will find yourself working hard to follow.

March 27, 2014 / Blog, Rob Rusconi

About the Author

Actuary, researcher and consultant, works in insurance, pensions and social security.


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Treating Customers Fairly (TCF)

“Pension savers have paid too much, for too long. It is time to put the saver first.” The UK government has capped the fees that may be charged to members of so-called “default” retirement funds. That country is introducing a system of auto-enrolment under which employees are required to save for their retirement a total of 7 percent of their salary, to which the government adds a further 1 percent. Members may opt out of this automatic enrolment, but early signs are that many of them are not doing so. Default retirement funds are the entities to which these contributions are to be directed. They need to meet a set of qualifying conditions. In return what amounts to a form of mandate on UK employees, the government has tightened the terms under which these funds may offer services to their members. And that’s where the charge cap comes in. It has been set at an annual limit of 0.75% of assets. This is tight, lower for example than any of South Africa’s actively managed unit trust funds and well below the corresponding charges under an RA in this country. “Over the next 10 years, the new charge cap will transfer £200m from the profits of the pension industry to the pockets of savers.” That’s a lot of money, surely food for thought for our policymakers.