‘Treating Customers Fairly’ no longer an option

The financial services industry is one of the most progressive and modern in the world and is dedicated to meeting consumer demands in the most efficient and helpful manner as possible. There are a variety of regulatory bodies in South Africa to provide the framework for the financial services industry to operate. We have the National Credit Regulator, the Pension Funds Adjudicator, The Short Term Insurance Ombudsman, the Consumer Protection Agency, and the Financial Services Board, to name a few. While these institutions assist individuals to get fair treatment, the Financial Services Board (FSB) has taken things one step further.

In line with international trends, the FSB is implementing a programme to regulate customer experience when they deal with financial services firms – it is called “Treating Customers Fairly” or TCF. TCF will ensure that fair and ethical treatment of customers becomes an important focus of financial services companies. By using a combination of values familiar throughout the finance industry and explicit rules, measurable fairness outcomes will be delivered. In other words, TCF will be able to gauge how well customers are treated within financial institutions, and put solutions in place should a company be found to treat employees unfairly.

To aid the implementation of TCF at company level, the FSB created a ‘roadmap’ and a self-assessment guide. The purpose of the roadmap is to inform financial services stakeholders of the addition of the TCF approach to the regulations that already govern client relationships and employee conduct in South Africa.

The Association for Saving and Investment South Africa (ASISA) has long been a supporter of TCF. In addition, they encourage members to strive to fulfil the needs and wants of their clients, rather than merely advocating a product purchase. ASISA also believes that all consumer markets needs to be catered for and dealt with in a way that is both transparent and easy to understand.

Krisen Rabindra, National Sales Manager at Standard Bank Financial Consultancy says, “The ideal process is to place people first before products and is a huge step in the right direction. Many individuals who sign up for financial products have in the past, never really understood or been sure of the features and benefits of the products they have purchased.”

The broad population groups to be addressed by TCF are are:

· Inexperienced groups with a high level of dependence and a low level of financial knowledge

· General consumer groups falling into the mass market with limited understanding of financial products

· Investment clients who have expertise and a sound understanding of financial services.

These customers have different needs and ASISA recommends that members should be able to show:

· Research and testing was conducted in product design.

· Why the product is suitable to a particular target market or group.

· The product fits the needs of the consumers in the target market.

· Whether it is an advice-seeking product or not

· Whether the commission and/or fee is justifiable.

· The targeted consumers can afford the product and other related fees.

· The product has been stress tested to identify how it might perform in a range of market environments and how customers could be affected.

· What consumer groups the product is not suitable for.

Mr Rabindra says, “Other important requirements of TCF are a commitment to quality advice, impartiality of advisers, on-going advice, communications with claimants, effective complaint handling processes and procedures and equal treatment of complainants, and equal treatment for all.”

While there are no set dates for the TCF implementation, it is definitely going to be implemented within in the next two years. The way fees and costs of the product and are disclosed and calculated will alter materially as TCF demands this accountability from the financial services industry.

“With regard to identifying target markets and population groups, proper segmentation and an in-depth understanding of these types of consumer behaviour is a critical tool for understanding a client’s needs and expectations,” says Mr Rabindra.

“Though the task of fulfilling an initiative of such importance and scale is challenging, the industry needs TCF to create business practices that generate a “win-win” situation for the financial institution and its clients,” he concludes.