Not having a rulebook to refer to was meant to simplify regulation, instead some years after the FSA decided to introduce Treating Customers Fairly confusion still reigns.
Concern over the adoption of the regime has prompted the Financial Services Authority to reassess its handling of small firms in an attempt to assess how well they have implemented its TCF ethos.
The announcement that it would be conducting more visits and telephone assessments of firms with five intermediaries or less, came six months after the regulator set a deadline of end-December 2008; this is the date by which time it expects all firms to be able to demonstrate that they are treating their customers fairly.
The FSA claims the results of the latest assessment will help it pinpoint individual firms that pose the biggest risk to its TCF objectives. In a quarter of all assessments the FSA expects to carry out full on-site visits.
Hector Sants, chief executive of the FSA claimed the assessments would benefit firms who are trying to do the right thing. He said: "We want to help small firms better assist their customers, many of whom are seeking advice on some of the biggest financial commitments they will ever make. Firms' management must ensure that the FSA's TCF initiative runs through every aspect of their businesses."
Earlier this year the FSA blamed the slow adoption of TCF on company cultural. It said: ‘It is only through establishing the right culture that senior management can convert their good intentions into actual fair outcomes for consumers.’
While small firms were making progress on TCF the FSA wants them to speed things up even more. Sants said this was the reason for the decision to increase visits and phone calls: "We are therefore increasing the contact we have with small firms to improve the rate of this change and to enable them to better help their customers."
Both advisers and their service providers agree that paperwork remains the biggest bugbear for smaller advisers when it comes to proving they are TCF friendly.
Michael Clapper, chief executive of packager Enterprise Systems claims it is not lack of implementation but lack of systematic record keeping.
He said: "Some of the smaller advisers have always had a problem with paperwork. But things are improving for example we have seen a large increase in the amount of advisers using using online systems to speed up the application process and I would imagine that the long term result of this will be the implementation of similar systems around TCF.
However the FSA's decision to push for fastest implementation of TCF could result in many smaller advisers seeking the solace of a network.
Clapper said: "The introduction of mortgage regulation resulted in increased network membership. This latest announcement might prove to be another watershed for network membership. I would imagine that the prospect of being censured by the FSA may led many advisers to seek the refuge of indirect authorisation."
But smaller advisers who claim to have come to terms with TCF are warning advisers to think carefully before giving up their independence.
