July 2006 is not a month to stir the memories. England had just been knocked out of the world cup on pens, the best-selling album was the High School Musical soundtrack (fist pump of solidarity with all the parents who endured that one) and according to Dr Wikipedia one of the most significant news events of the month was George Bush greeting Tony Blair with the phrase, yo Blair! Surprisingly, Wikipedia doesn’t record one of the most significant events for financial services. July 2006 was the launch of the FSA’s Treating Customers Fairly initiative, and ten years on the six outcomes still cut to the heart of the challenges and opportunities facing firms. So, a decade on, how has the industry fared against each of the outcomes?
Outcome 1: Consumers can be confident that they are dealing with firms where the fair treatment of customers is central to the corporate culture.
Overall, a lot of improvement here, albeit from a very low starting point. I would question how many consumers feel confident that all of financial services has customer outcomes central to the corporate culture, but there are certainly an increasing number of examples where this is the case. How a firm treats its employees, and the culture this generates is arguably the biggest contributory factor to the quality of the customer outcome. If there is one outcome we’d like to see firms really focus on, this is it.
Outcome 2: Products and services marketed and sold in the retail market are designed to meet the needs of identified consumer groups and are targeted accordingly.
This is an area where there needs to be considerable improvement. All too often the customer, needs are identified internally with the results being a repackaged version of an existing product line that people hope will sell better than the first version. We see little evidence of genuine customer research to understand their wants/needs/personal traits, and then developing solutions and services to meet these needs. This needs to extend to marketing as well. It is very rare to see a firm clearly state who their product and service are, and are not, suitable for.
Outcome 3: Consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale.
Generally ok with this one. The way individuals access and consume information has transformed over the last decade, and financial services has had to at least attempt to recognise this. For most firms it is possible to access information online, and whilst the quality and accessibility of this info can vary it is at least there.
Outcome 4: Where consumers receive advice, the advice is suitable and takes account of their circumstances.
Big tick in the box for this one. Financial Advisers are now much more professional and qualified than ever before, and 4 years on from RDR they are increasingly confident in a fee based world. Alongside TCF and RDR arguably the most significant work the FSA undertook in the last decade was the focus on suitability. A personal recommendation will now be at a level of risk the customer is willing and able to tolerate, and the suitability of the costs involved will also have been assessed. Customers who only encountered advisers over a decade ago will see a huge improvement if they work with an adviser now, and with the demand for advice increasing as a result of the pension reforms the advice sector has never been in better shape.
Outcome 5: Consumers are provided with products that perform as firms have led them to expect, and the associated service is both of an acceptable standard and as they have been led to expect.
This is a hard one to assess. As mentioned above in outcome two, firms need to do a lot more to set expectations and clearly state what type of customer products are, and are not suitable for, however it’s probably fair to say that service is gradually improving across the sectors. Again, technology has played a part here enabling online self-service to be the norm, but most firms we encounter at least recognise the need to offer acceptable levels of service.
Outcome 6: Consumers do not face unreasonable post-sale barriers imposed by firms to change product, switch provider, submit a claim or make a complaint.
More work needed here I’m afraid, and with the release this week of their work into cash savings the FCA clearly agrees. There have been some improvements in the last decade, especially in the banking sector, but the barriers are still there. Exit penalties still exist in some pension products, and we are hearing talk that even 4 years after RDR re-registration of assets between platforms/asset managers is still not as slick as it should be.
So, overall a mixed bag. TCF was a hugely important initiative and it has delivered a number of improvements but more work is needed. When we work with our consulting clients it’s still noticeable how the six outcomes often give them the answer to the problems they are wrestling with. If you are embedding each of these outcomes into your firm, and especially outcome one you won’t go far wrong.
Ten years in we would urge firms to reconsider their approach to TCF, and to step back and review how they are addressing each of the six outcomes above. Is our view above accurate? If not, we’d love to hear your comments below.