As a youngster I would repeatedly be told by my parents that ‘life’s not fair’. This statement would normally have followed an indiscretion on my part – normally a fight with my sister – and the withholding of a treat – perhaps a Saturday evening sat in front of Little & Large or The Paul Daniels Magic Show. Did I like the cream of Saturday night entertainment being taken away? Not a lot.
Having been told at this early age that life wasn’t fair I came to the conclusion that it wasn’t in my best interests to be ‘fair’ to anyone else. Therefore, I became the ‘selfish’ one in our family and would play merry hell over such ‘important’ issues as who had received more Pepsi than me. My parents only had themselves to blame.
Anyway, the principles of fairness are ingrained from an early age. The same could be said for broker firms. I wish I had a pound for every AMI member who has said: ‘Of course I treat my customers fairly, otherwise they wouldn’t be my customers,’ or another old favourite, ‘When are the FSA going to treat brokers’ fairly?’. I’d be as rich as the FSA’s directors.
Of course, I do have sympathy. Most AMI members can be classed as ‘small firms’ and they look on TCF as: (a) a poorly defined concept; (b) ‘another stick to beat us with’; (c) a ‘catch-all’ under which the FSA can throw in rules without having to consult on them; or (d) all of the above. Is this a ‘fair’ reading of your thoughts on TCF?
Perfectly reasonable
When it comes down to it though, I tend to agree with the concept. TCF comes from Principle Six and this principle seems perfectly reasonable to me. It reads as follows: ‘A firm must pay due regard to the interests of its customers and treat them fairly.’ Nowt wrong with that, if you ask me. The problem comes with how the FSA ensure this principle is followed – the utopia would be that the FSA would allow firms to go about their daily business and during the course of a firm visit decide ‘yay’ or ‘nay’ on whether a firm is treating its customers fairly. I’m being incredibly naive here because what is it using to measure if a firm treats its customers fairly, what are the key targets it must hit, what do customers think about their treatment, and on and on.
Which is where you reach the position we currently have. The FSA’s TCF initiative is now an all-encompassing piece of work taking up large amounts of resource not just at a firm level but also the regulator. We are now two months away from a pivotal point in the process. For the FSA, TCF has always been a four-stage ‘journey’ that firms must work through – Awareness, Strategy & Planning, Implementation and Embedding.
A pivotal point
Last year in its TCF update, the FSA announced that by 31 March 2007 it expected all firms to be at the implementation phase with their TCF work. Indeed, the FSA believes all firms should have ‘implemented TCF in a significant part of their business’.
For those who are yet to hit the ‘implementation stage’ the FSA says a firm is at this point when it is:
- Developing plans and processes;
- Allocating TCF resources and responsibilities; and,
- Creating capability among its staff.
The major point of this work is that the FSA is forming its view on firm’s ability to hit the deadline right now. Firms are being asked to provide evidence of their TCF work and how they intend to ‘implement’ within the business up to deadline.
A hollow deadline?
There is a danger that some firms may see this as a hollow deadline. Will the FSA take any real action against those firms it deems to have failed? It has said it is less likely to take enforcement action against a firm where:
- The firm has considered the implications of TCF for its business.
- Senior management have played the role FSA expects of them in relation to TCF.
- A firm has made a genuine attempt to deliver on what TCF means for it.
- There hasn’t been significant – or risk of – consumer detriment.
- A firm has not responded to indications that there are problems.
- A firm has failed to identify shortcomings and to develop a strategy or action plan to deal with them.
- There’s been a breach of Principle Six or other relevant principles.
- There has been significant actual or potential consumer detriment.
The deadline is a real one and the FSA is putting in the resource to find which firms meet it. The consequences of not engaging with TCF are severe. It would seem all’s fair in love and regulation.
