The six TCF outcomes

The objective of TCF is to create a fairer and more effective financial services industry. To achieve this, the FSCA has identified six required customer fairness outcomes.

These are very specific, and it is essential that these are delivered in a way which is clear, evident and proved. The way to ensure this is to give effect to the six TCF Outcomes which be considered in detail, each as separate Chapter.

 

Outcome 1

Customers can be confident that they are dealing with businesses where the fair treatment of customers is central to the corporate culture.

 

Outcome 2

Products and services marketed and sold in the retail market are designed to meet the needs of identified customer groups and are targeted accordingly.

 

Outcome 3

Customers are provided with clear information and are kept appropriately informed before, during and after the point of sale.

 

Outcome 4

Where customers receive advice, the advice is suitable and takes account of their circumstances.

 

Outcome 5

Customers are provided with products that perform as financial services providers (FSP’s) have led them to expect, and the associated service is both of an acceptable standard and as they have been led to expect.

 

Outcome 6

Customers do not face unreasonable post-sale barriers imposed by financial service providers to change product, switch provider, submit a claim or make a complaint.

 

The aim of TCF

TCF outcomes are aimed at reducing market conduct risks and protecting consumers. The delivery of these specific outcomes will ensure the supply of appropriate financial products and services to customers and enhanced transparency and discipline in financial institutions, resulting in improved customer confidence.

The final desired outcome can be achieved by delivering three intermediate outcomes, each which can be traced back to the six specific outcomes;

 

 

 

 

The consequences of unfair treatment or poor decisions are only felt some time after transacting, in some cases many years.

Customer trust is critical as our industry is embedded with vague and difficult to understand, technical products which are filled with jargon.

Customers of FSP’s do not have as much information available to them as the product supplier or financial services provider, leaving customers open to unfair treatment.

The customer has very little guarantees that the product or service is going to work until the point it may be too late to turn back.

Where there is a loss of trust, customers will no longer support an FSP, complain to the Ombud or Regulator or decide to go the legal route.

In South Africa, these challenges are worsened by low levels of both basic and financial literacy, increasing the risk of customer exploitation.

TCF is more than a means of creating contented customers, as a satisfied customer can be unknowingly subjected to unfair treatment. Neither does TCF imply that customers do not have to make decisions or take responsibility for such decisions.

It also does not mean that all companies must do business in an identical manner – as providers have different resources and ways of doing things. As long as business is done fairly and transparently.

The primary focus of TCF is on firms that manufacture products or provide services (including advice and intermediary services) directly to customers. Where manufacturers of such retail products are concerned, both the product manufacturer and the intermediary are required to ensure fair treatment of their shared customers.

The FAIS Act and General Code of Conducts already enforce obligations on FSP’s and representatives that are relevant to the TCF fairness outcomes.

The delivery of fairness outcomes 3 (clear information) and 4 (suitable advice) is to an extent done by the disclosure, advice, conflict of interest and licensing requirements under the FAIS Act and Code of Conducts.

The outcomes based TCF framework requires FSP’s to demonstrate that they are consistently delivering fair outcomes to consumers and that senior management are taking responsibility for ensuring the firm and staff at all levels deliver the consumer outcomes relevant to their business through establishing an appropriate culture.’ It is therefore clear that senior management are responsible for the introduction and embedding of a culture that ensures the consistent delivery of fair consumer outcomes. to demonstrate that they have embedded the broader TCF culture framework within their companies (TCF outcome 1).

Product suppliers, FSP’s and representatives are required to share accountability for fair treatment of their mutual customers.

The primary responsibility for delivering TCF outcomes 2, 5 and 6 (product and service design, product performance and service levels, and post-sale barriers) rests on product suppliers. Representatives will also be expected to consider their role in delivering these TCF outcomes.

The purpose is that representatives can and should bring greater pressure on product suppliers to ensure that inappropriately designed and marketed products, poor post-sale service practices, and unreasonable post-sale barriers are challenged.

Ensuring a product is appropriate for a particular target market is mainly the product supplier’s responsibility, and ensuring the product is suitable for the customer concerned is mainly the representative’s responsibility (Outcome 4). It does not mean that an intermediary can step down from the responsibility for recommending an unfairly or inappropriately structured product to a customer on the basis that ensuring fair product design is the product supplier’s responsibility. An appropriate level of product “due diligence” is expected from intermediaries.

FIGURE 2 – Priority and shared responsibilities in terms of TCF outcomes

Product suppliers must ensure the correct product is targeted at the correct market and customers receive fair after-sales services and do not face unreasonable post-sale barriers.

Representatives must provide clear information to customers, which falls within the realm of suitable advice that takes account of customers’ circumstances, and they should also ensure that they are familiar with the products they sell, including any post-sale barriers.