Observing confusion around the difference between good conduct and treating customers fairly, Rebecca Prestage of The Consulting Consortium revisits the regulator's distinction.
With the Financial Conduct Authority’s (FCA) perpetual message focusing on its desire for firms to place customers at the heart of their businesses, doing what they ‘should’ do as opposed to ‘could’ do, could it be that such firms are forgetting about basic principles?
We have seen advisers displaying some confusion about the difference between good conduct and treating customers fairly (TCF). A question that comes up again and again is: is it not the same thing but under a different name?
The straight answer is no. The slightly longer answer is that it is a point of principles.
The FCA’s Principles for Business sets out the main regulatory obligations that apply to authorised firms. They state that a firm must:
A point of principles
• Conduct itself with integrity, care and diligence
• Have in place adequate systems and controls
• Have effective risk management systems in place
• Pay due regard to customers and treat them fairly
• Communicate with customers in a way that is fair and not misleading
• Manage conflicts of interest
Good conduct encompasses all of the above. However, the FCA’s meaning of conduct relates to how a firm runs and operates its business with the customer’s best interests at heart and builds on the foundation of treating customers fairly, whereas the TCF principles largely centre on the treatment of customers in relation to products.
It is worth, therefore, going back to basics with a reminder of the six TCF outcomes, with some examples of good practice, to ensure that firms are continuing to meet their regulatory requirements.
Consumers can be confident they are dealing with firms where the fair treatment of customers is central to the corporate culture
Senior management and staff should consider the fair treatment of customers in all that they do. Everyone is encouraged to get involved, challenge decisions and suggest improvements where appropriate.
• Regularly analyse what is going on and identify where practices could be improved
• Remember TCF is your responsibility – you cannot delegate responsibility to compliance consultants
• Undertake a comprehensive review of your business at least annually
• Remember that management information must be maintained and should document what is going on in your business – do not keep everything ‘in your head’
• Keep up to date with regulatory requirements and ensure your technical skills are adequate
and relevant for the business you are undertaking
• Consider joining a local networking group to help you benchmark yourself against
Products and services marketed and sold in the retail market are designed to meet the needs of identified consumer groups and are targeted accordingly
The products and services you offer should meet the needs of your customers.
• Undertake regular reviews of high risk products
• Keep a record of recommendations to replace existing contracts and monitor information on a regular basis to identify any trends
• Have clear definitions of attitude to risk so that your customer can understand what each means and how they relate to them.
Consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale
You should give your customers clear information about products and services before and during the sale process and continue to keep them informed after the sale.
• Use jargon-free communications that clearly set out what is being offered
• Have procedures in place to update clients on progress
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Spent 56 years at Schroders
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