Financial services companies increasingly view Treating Customers Fairly (TCF) as a commercial issue to embrace rather than a compliance issue or regulatory threat, according the Council of Mortgage Lenders (CML).
Speaking to guests at a CML lunch in Cardiff, Michael Coogan, director general, has said financial services firms increasingly do not see TCF as a compliance issue and potential regulatory threat. But rather, as a commercial issue to embrace to help to build their business.
Bernard Clark, a spokesmam for the CML, says Coogan was echoing the views of the Financial Services Authority (FSA) and lenders, which are increasingly taking the approach that TCF is less of a compliance issue and more about adding commercial value to businesses.
Robin Gordon-Walker, a spokesman for the FSA, says it is excellent that firms are looking at TCF in a positive light when they used to only see it as an extra layer of regulation.
But, Nick Baxter, managing director of Mortgage Promotions, argues most lenders do see TCF as a regulatory threat. “They see it as something they have to comply with, rather than something that will add commercial value to their businesses,” he says.
Moreover, Baxter believes lenders and IFAs should continue to think of TCF as a compliance issue because the FSA still treats it this way so they should be wary of “taking their eye off the ball”.
But, Baxter says, advisers should also recognise that TCF can add commercial value to their businesses because it is “all about good business practice”. He advises intermediaries and lenders to embrace TCF by focusing their whole business culture on satisfying customers’ needs, rather than being commission-or target-led. He adds: “A firm with a passion for its consumers will be more successful and that is where the FSA is coming from.”
Likewise, Melanie Bien, associate director at Savills, says TCF is broader than a compliance issue, which “must come from the top and permeate all levels of the firm”.
Bien thinks some firms have a long way to go before they can say they have “embraced” TCF but she admits it takes time and has brought a lot of costs for lenders. She points out it has only been a year since the mortgage industry was first regulated and for some lenders the costs were “a bit of a shock”.
Meanwhile the Association of Independent Financial Advisers (Aifa) has published the results of its IFA Census survey on TCF carried out in September.
Aifa says 80% of respondents were ‘aware’ or ‘very aware’ of the FSA's TCF initiative.
And over half had built TCF into their operations either ‘wholly’ or ‘partially’.
Chief executives were most likely to be responsible for implementing TCF in the firm (54%), with compliance (23%) and senior management (18%) the next most likely to be responsible for its implementation.
On cost, 30% of firms feel insufficiently clear about the long-term scope of TCF to provide a figure, whilst 39% say TCF will not add any additional costs to their businesses compared to 31% who say it will.
When asked whether the FSA has done enough to communicate TCF to firms, 63% say it has not.
Chris Cummings, director general at Aifa, says the market is still uncertain about the real impact of the FSA’s move to principles based regulation so caution is only natural.
“The FSA needs to ensure that TCF does not result in regulation via the ‘backdoor’. Firms need to be clear about what is expected of them, otherwise the introduction of this initiative could create regulatory and financial problems,“ he adds.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Emily Perryman on 020 7968 4554 or email [email protected].IFAonline
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