I bet you think you are compliant.
You’ve been in the business for donkey’s years; if you didn’t do the right thing by your customers, they wouldn’t come back to you and recommend their friends; your firm has never had a complaint, at least not one you didn’t sort out over the phone.
Your records are in your head, which is safer than on the cheap laptop you bought off of Ebay or trying to read your own writing years down the line. You know you’ve always done it the right way and your customers know, which is all that matters, isn’t it.
But just remember, if the Financial Services Authority (FSA) ever calls on you, if it isn’t written down somewhere, it didn’t happen; if you haven’t got a process which you use to confirm you are compliant, you aren’t; and if you can’t demonstrate that you and your firm use notes, processes, complaints and compliance processes as learning tools, you can’t demonstrate you are treating customers fairly.
“I’m just a one-person firm, with my spouse doing the typing and admin,” I hear you cry.
A year or two I was at an FSA seminar on Senior Management Responsibility and just such a one-man band rose to his feet during question time and asked of the FSA mandarins: “Do I really have to do all that? There’s only me and my niece in the firm.”
The FSA man looked at him with compassion and said: “Yes, of course you do – and you have to prove to us with your records that you do it, you do it competently, and your niece is competent to do whatever she does for you”.
However, this was tempered by a further comment from the podium that: “We only expect you to have records ‘commensurate with size and nature of your business, however’.”
So start from the premise that however big a firm you are, or however small, you do need to have records and processes and use compliance audits to ensure that you, and your clients, can sleep at night.
Confirming TCF
To cover all your compliance monitoring and audit needs I would need to write you a manual. So I’m going to concentrate on just one or two particular issues, in particular, how you can confirm you are treating customers fairly and, in doing so, complying with Principles for Business Six and Policy Statement 07/11 – responsibilities of providers and distributors for the fair treatment of customers.
Your checklist will need to demonstrate that you or your firm has achieved six basic objectives:
- Clear and easy to understand information has been provided to your clients or those distributing your products.
- Your clients received the right advice and most appropriate product.
- Your staff are trained or you have appropriate training in place to ensure they are competent to do what they do.
- You delivered what you promised.
- You fixed it when it went wrong, even if it wasn’t your fault.
- You never take advantage of a client and their lack of knowledge or dependency upon you.
Information
What information do I give my client? Some of that information is prescribed, such as the Initial Disclosure Document and the Key Facts Illustration (KFI).
But has that information been given out at the appropriate time and is the information contained in it correct? If the product or contract had to be changed, was a new KFI provided?
Most importantly, how is the provision evidenced in every case? Many of the sourcing systems provide this record-keeping automatically as part of the process; they store the actual documents used or produced for later auditing and review and do so at a modest cost. But take a look at the other documents you use, such as any product provider literature.
Take a look at that literature with a customer eye and check just how accurate, understandable and comprehensive is. What do I do with this information? Take another look at the customer data and review the product recommended. Would you use the same product again, with hindsight?
If you are supervising a colleague or advisers, would you recommend that product? If not, explain to them why not. Are there any lessons to be learnt?
Note down what you’ve done and agreed, if only what you’ve agreed with yourself and make sure any actions identified happen. That’s ‘Treating Customers Fairly’ (TCF) and training and competence (T&C).
If you do the above, you’ll evidence objective two. But only if, where you identify customer detriment or the potential for detriment, you do something about it.
The FSA doesn’t only look for records of compliance audits and self-auditing, but expects you to take some action to right wrongs and learn from the exercise.
Staff needs and requirements
Staff like to be nurtured and trained, but clients also like to feel they are dealing with trained and knowledgeable staff, even if it’s the office junior taking messages.
Even the new simplified and principles-based T&C handbook requires your staff to be competent to do the job you ask them to do, maintain that competency and for you to have records to evidence why you believe them to be competent. If you are a sole practitioner this will require some objective self-analysis.
In your audit, are there recruitment records demonstrating why you believe that person to be competent to do the job you recruited them for?
Or what training they need to bring them up to standard and what timescales and objectives you’ve set for themselves and you as the manager, even if it is just your niece offered a job on the nod? Is there a written training plan for everyone, including yourself if there is just you?
Is it reviewed and updated regularly and what is the evidence for this? TCF includes providing a competent service to clients, whether that be advice or administration, in a timely manner and which delivers what’s promised in products and service.
If it goes wrong, fix it
Which brings me neatly to my next objective. ‘Delivering what’s promised’ doesn’t just cover providing the customer with the amount they want to borrow at the best rate you can identify but also includes all other aspects of your service, such as application processing, chasing the provider and meeting the customer’s expectations. This is best evidenced by meeting the next objective.
If it goes wrong fix it, even if it’s not your fault. In your audit, look for a log of the complaint and description of what went wrong. Getting it wrong isn’t non-TCF – unless it is as the result of a deliberate action or negligence – but not fixing it is.
Look for any learning opportunities and if there is an organic process problem look for evidence that the process was fixed and the learning was passed on to others. If it’s just you, still keep a log, jot down what you did to fix it and set yourself a training objective in your training plan.
All about record-keeping
If you do all of the above you will know that no one is taking advantage of the client, or you’ll demonstrate what action you took as the result of identifying the issue.
It’s all about keeping records, even if you are a one-man band, demonstrating that you go back to the records to review what happened, evidencing any actions required as a result of the review and, of course, evidencing the review.
Which suggests I could have kept this article one line long. Jot it all down, go back and review the records, turn the key issues identified into corrective or learning actions and objectives.
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