Well, March is finally here, and the ‘Treating Customers Fairly’ (TCF) deadline is almost upon us.
How ready is your firm for the initial request for your various TCF documents, the follow-up phone call and possibly a Financial Services Authority (FSA) visit? If you’re a broker based in Northern Ireland you’ve probably had your call, and maybe even your visit.
The Association of Mortgage Intermediaries (AMI) has worked hard to support members, particularly the smaller directly authorised firms. We’ve published various documents on our website, which members can access.
No ‘tick box’ solution
Our work on TCF and specifically management information has been carefully developed, with input from leading industry figures and even the FSA.
We have deliberately stopped short of producing a ‘tick box’ solution, because as we all know TCF is bespoke and individual to any firm, and there is no ‘tick box’ solution. But the outputs include examples of interpretations of AMI’s methodology and possible potential data.
As part of the sign-off for our work, our documentation was submitted to the FSA. The FSA does not ‘sign off’ guidance work, but it is notable that the FSA has been given the opportunity to review the material in draft, point out areas of strength and – significantly – commented on any omissions.
This allows AMI members confidence that their guidance has been considered by those that are responsible for the TCF initiative.
Consumer outcomes
As part of their feedback, one particular theme cropped up, and it’s one that I fear many firms may not have tackled.
Rather like lining up a family for a group photograph in their ‘Sunday best’ and then not pressing the button, firms seem to struggle with the final jump into consumer outcomes.
For example, firms can pull together a wide range of management information, from information in their new business register and their training and competence scheme to their business plan. They can present all this data in a clear way, and can consider outliers and account for any anomalies.
Firms can also target set; considering where they would like the data to be in six months or a year’s time. They can go further still and try to benchmark themselves against other firms, by requesting data from lenders or insurers, on subjects as diverse as arrears, possessions, rejected insurance claims, even proportions of self-certification or fixed rate business, or into-retirement lending.
However, even with all this data in place firms could still miss the point. The final hurdle that a firm needs to cross is to relate its management information to the six TCF consumer outcomes. Without doing this, firms have not actually taken the photograph, to use the previous analogy.
The six TCF consumer outcomes are well highlighted, so I’ll not repeat them here. Firms need to consider which are relevant to their business.
Speaking entirely personally, I think that most firms will be able to relate to five of them at least, and perhaps some firms will consider that all six are relevant.
On a purest basis, some firms may well believe that outcome two is only relevant to those that have an involvement in product design, but I think some firms could consider that their choice of range and scope of products offered could fall under this outcome. Similarly some firms could also interpret outcome five as only material to a lender.
Demonstrating achievement
Once a firm has identified their applicable Outcomes, they need to identify suitable management information to demonstrate achievement of them.
On the face of it, this sounds simple, but if you take an outcome and try and think of a suitable piece of management information, it’s actually quite hard.
Instead, perhaps an easier way of achieving the results is to take a list of positive management information, each bit demonstrating TCF in part and to tie in several points to the outcomes.
So for outcome one the combination of three or four different pieces of management information, relating to absence of commission bias, a balanced product mix and strong Continuing Professional Development of an adviser, for example, could all combine to demonstrate a positive achievement of outcome one.
The actual management information used will vary by firm, and to an extent an individual’s interpretation of the outcomes.
Only by going to the final stage, of actually pressing the camera button, will firms get the management information in place to demonstrate positive consumer outcomes, so fail to cross reference to the six statements at your peril.
