Bringing more clarity to financial products is an important aim of treating customers fairly (TCF) legislation. Being able to demonstrate that clients fully understand the options available is best business practice and enables the client to have the best standard of service possible. Adherence to the principles will also benefit advisers and providers by giving them that much needed compliance train that ensures against claims of mis-selling.
The FSA has stipulated that TCF should be an integral part of business culture and while for many it already is in an informal sense, the basis of TCF is that advisers and providers should be able to actively demonstrate it through their business practices. As a result, the FSA initially set a March deadline for firms to show they were taking the principles of TCF seriously and were implementing them into their businesses.
However, therein lies the problem - TCF is principles led and it is up to the advisers and providers to assess the legislation and determine how best they can fulfil it. Just how the FSA intends to enforce this will be subject to debate as there is no hard letter of the law that should be adhered to and businesses will all start from different base points depending on their size and business culture. While the FSA has indicated it intends to come down hard on those who don't reach the required standard, what form these penalties will take is still to be determined. As a result the months preceding the March deadline were rife with suggestions that many within the industry were not taking TCF seriously enough.
The FSA published a progress report in May and the initial findings are encouraging. So far 93% of major retail firms and 87% of medium sized retail firms were able to demonstrate they were embedding TCF principles into their business. However, only 41% of small firms were able to say the same indicating that there is plenty more work to do before the final deadline of the end of December 2008. By this time firms are expected to have completed their work on TCF and be able to demonstrate they are consistently treating customers fairly. With large and medium firms already showing a real commitment to TCF, questions need to be asked as to why smaller firms are not demonstrating the same level of commitment. Is it due to apathy or are many of them genuinely struggling to meet the compliance burden? The FSA has stepped up its assistance to small firms by expanding the range of online tools available and rolling out a series of regional workshops though only time will tell if these extra measures will have the required effect.
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