In May this year, the Financial Services Authority (FSA) published its progress report on the ‘Treating Customers Fairly’ (TCF) initiative. I’m sure small mortgage intermediaries don’t need reminding of the deeply disappointing results some of them scored in the work.
At the time, the Association of Mortgage Intermediaries (AMI) was at great pains to observe that the deadline did not automatically mean that small firms were not treating customers fairly. We had also carried out our own research, which indicated that over 70 per cent of our members were either implementing or on their way to embedding TCF in their businesses by the deadline.
It was noticeable that the FSA’s research was conducted in December and January – some three to four months ahead of the May deadline. Given that smaller firms tend to respond more quickly we felt that there was a time-lag problem between FSA’s data and that of the industry.
But why reminisce? Well, a new TCF deadline looms large – and while March 2008 may seem an eternity away, this deadline cannot be achieved without planning and ongoing work; leave TCF to your New Year’s resolutions and you will not have time to do the necessary work to hit the next deadline.
Demonstration
So, what is next for TCF? Well, May 2007 was the ‘implementation’ stage of TCF. By December 2008, the FSA expects firms to be able to demonstrate to both themselves and to the FSA that they are consistently treating their customers fairly. It is this ‘demonstration’ that poses one of the biggest challenges. The FSA knows this, and to avoid a repeat of May this year it has set an interim deadline of March 2008 for firms to have appropriate management information or measures in place to test whether they are treating their customers fairly.
One of the concerns that AMI has raised with the FSA is over a small firm’s ability to interact in a principles-based TCF environment. Large firms have their own dedicated FSA supervisor, but small firms have only the contact centre as their main access point for FSA support. In response to this, the FSA has recently published two guides on TCF – one covering culture and one on management information. AMI is also going to publish a factsheet on TCF which helps to tackle the issues of culture and management information.
The FSA believes that TCF is a cultural issue that can only evolve in a firm from the top. It should affect all areas of strategy – from decision making and planning through to controls, performance management and reward. Its document highlights useful examples of this, and demonstrates how strong leadership from senior management can create the right environment for good TCF culture to evolve.
The management information paper also has plenty of useful examples of how small firms can develop management information. The FSA acknowledges that small firms will have much of this information already and that TCF should not necessarily require substantial amounts of extra information.
Relating to TCF
As a sole trader or a small firm of a few staff, members often question how TCF fits in with their firms – they feel they are so close to the ‘sharp end’ that they can’t relate to these corporate ideas. However, while they have the raw information, management information is about the presentation, analysis and consideration of this data.
One of the analogies the FSA highlights, which is particularly relevant for a small firm, is that of a mobile telephone bill. A user knows exactly what calls they make and receive, and how many text messages they send. In that respect, the information in the bill isn’t new at all, but it is the way that the information is presented that is useful, allowing a firm to see patterns or trends, and to make adjustments to the call plan.
An adviser might know that they wrote 20 mortgages in the last month. But do they know if they were all fixed rates, or how many of those cases included life cover or payment protection insurance? Do they know what proportion were interest only, or first-time buyers, or self-certification?
As an adviser you might analyse the information you already hold and discover that 90 per cent of your first-time buyer cases are interest only and discounted rates, while of your home movers and remortgages only 30 per cent are interest only and 65 per cent are fixed rates. In collating and comparing this data you are able to see any trends and to make adjustments to business processes – but the information isn’t fundamentally new.
Service issues
Another example might relate to poor service. In the situation of a sole trader with one administrator, the administrator may be aware that one particular life company causes a disproportionate amount of work. However, they could formally analyse the client calls received relating to queries on protection policies being underwritten.
The analysis could find that 75 per cent of the complaints relate to poor communication from just one insurer – which, again, is not new information to the administrator. But an adviser could use this formal management information to conclude that service levels of that insurer are poor, and to stop using it, or use it with caution. This is about considering the information you have and know already, and consider trends in the data.
AMI intends to publish its factsheet on TCF this week. Log-on to the website to download a copy.
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