TCF – The Importance of Achieving Fair Outcomes

Posted on the 19th March 2020

Peter Cottle and Jo Davis, Partner at law firm Locke Lord, provide a short guide on how firms can achieve Fair Outcomes for their customers

“Culture eats strategy for breakfast”, as Jonathan Davidson, the FCA’s Executive Director of Supervision – Retail and Authorisations, is fond of reminding firms. Through Principle 6 of the FCA’s ‘Principles for Businesses’, (“A firm must pay due regard to the interests of its customers and treat them fairly”) the TCF initiative and its six outcomes are a central pillar of the culture that the regulator expects to see within authorised firms.  Firms should ensure that reaching fair outcomes is central to their business culture and should be fully equipped to demonstrate when asked by the regulator that their sales processes as one example is designed with good customer outcomes at the heart of their business.

As a reminder, the six TCF Outcomes are:

  • Consumers can be confident that they are dealing with firms where the fair treatment of customers is central to the corporate culture.
  • Products and services marketed and sold in the retail market are designed to meet the needs of identified consumer groups and are targeted accordingly.
  • Consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale.
  • Where consumers receive advice, the advice is suitable and takes account of their circumstances.
  • 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.
  • Consumers do not face unreasonable post-sale barriers imposed by firms to change product, switch provider, submit a claim or make a complaint.

As is obvious, these outcomes cover a broad range of issues from product design and information requirements through to post-sales help and associated services. To ensure that each outcome is delivered is therefore something that requires a number of systems and controls, each running effectively across an authorised firm’s business. So what are these processes, systems and controls that should firms look at putting in place?

Firstly, firms should define what TCF means for them and be able to articulate how TCF is woven into their strategy and their principles. Senior Management in particular should understand what it means for the firm and how it seeks to deliver each of the outcomes throughout the entire product life-cycle, including once a contract has concluded.

Secondly, firms should identify where there products present risks of unfair outcomes being delivered to customers and the steps taken to mitigate such risks being realised. Going further than this, firms should also scrutinise the customer journey to identify where unfair outcomes are in fact being delivered and steps taken to rectify such situations.

Thirdly, looking ahead firms should assess how fair outcomes are measured and recorded. This is likely to include ensuring sufficient resource is in place to capture such detail, as well as being place to ensure fair outcomes are delivered. Appropriate measures should be identified and tested and systems put in place for relaying this information to the most appropriate people within the business.

Fourthly, measures should be monitored and the assumptions underpinning such measures kept under review. Periodically these assumptions should be interrogated, challenged and, if necessary, changed. Required actions should be defined in the event that monitoring information demonstrates that thresholds or tolerances are being pushed. Rationale should be in place to explain why such actions are appropriate in such an event.

Finally, all of the above processes, systems and controls should be reviewed on a regular basis. The findings of these reviews should be documented so as to provide contemporaneous evidence of the steps taking by the firm to ensure that TCF remains relevant and up-to-date with the firm’s products and services.

To discuss further how GrowCap can support you in these challenging areas please contact Peter Cottle at peter.cottle@growcap.co.uk.

GrowCap Ltd and associate companies disclaims all liability whatsoever in relation to any materials or information provided. This piece is provided solely for educational and informational purposes. It is not intended to constitute legal advice or to create an attorney-client relationship. If you wish to secure legal advice specific to your enterprise and circumstances in connection with any of the topics addressed, we encourage you to engage counsel of your choice.