TREATING CUSTOMERS FAIRLY (TCF)
South Africa has adopted a “twin peaks” model as the basis for regulation of regulated financial institutions. The two peaks are prudential (financial) regulation and market conduct regulation. The FSB is in transition to becoming a dedicated market conduct regulator and has adopted the TCF framework as the basis for its supervision of the conduct of business of regulated financial institutions.
Pension funds and pension fund administrators are regulated financial institutions and are subject to TCF. To date much of the emphasis has been on retail financial services, witness the Retail Distribution Review, so that administrators and trustee boards are often only peripherally aware of TCF and its implications. There is no doubt that more specific attention will be given to the retirement fund industry especially in the context of fund members as customers.
The 6 TCF Outcomes are:
- Customers can be confident that they are dealing with firms where TCF is central to the corporate cultures
- Products and services marketed in the retail market are designed to meet the needs of identified customer groups and are targeted accordingly
- Customers are provided with clear information and kept appropriately informed before during and after point of sale
- Where advice is given , it is suitable and takes account of customer circumstance
- Products perform as firms have led customers to expect , and service is of an acceptable standard and as they have been led to expect
- Customers do not face unreasonable post-sale barriers imposed by firms to change product, switch providers, submit a claim or make a complaint.
Perhaps the most informative view to date of peer positioning in the Retirement Fund industry is provided by the results of the FSB TCF Baseline Study Feedback Report at pages 121 to 12. Stripped of the corporate speak the key component is the incorporation of the TCF outcomes in a properly structured risk management framework. Regardless of the size of the organisation this means identifying and addressing the key risk exposures in the firm/customer interface. Let’s take outcome 6 and the aspect of submitting a claim. Do customers know?
- What constitutes a claim – what types of events give rise to a claim?
- How does one claim?
- Has the customer communication been structured in such a way as to be effective – ease of access, language, comprehension etc?
- How easy is it for the customer to interact with the firm?
- Are the firm’s claims procedures designed to finalise claims straightforwardly and expeditiously?
- What does it look like from the customer eye view?
The FSB has shown increasing commitment to TCF in the retirement Fund arena in terms of ensuring fair treatment for members in the contexts of fund closures and the handling of unclaimed benefits. Claims and complaints handling are also clearly priority areas where it is apparent that many customers are not treated fairly, not because service providers deliberately set out to not to settle claims and complaints but more often because of customer ignorance of the product and its benefits and the often technical nature of customer communications Processes are often fund/administrator facing and not customer centric.
A simple list of customer ‘touch points’ can be developed for each of the outcomes, monitored and refined over time. Every Administrator and Fund should have one incorporated in a TCF policy and actively use it to ensure that they do Treat Customers Fairly.