Preparing for a TCF assessment

Now that the March 2008 deadline for implementation of TCF MI has passed, and with the further deadline of December 2008 for all firms to be consistently treating customers fairly fast approaching, the FSA has begun to assess small firms through a combination of mini-visits, face-to-face meetings at regional venues and telephone assessments.

All small retail intermediary firms will be assessed over a three-year period and the FSA will use the results to help with TCF risk profiling. Follow-up visits are expected to be required in about a quarter of cases.

This page focuses on what you may expect from an assessment.

Note that is general guidance only and therefore cannot be solely relied upon as each visit could differ slightly, and additional and/or different questions may be asked.

Pre-assessment email

Before being contacted for an assessment you’ll receive a pre-assessment email asking you to send in information in advance, including:

the name and position of the individual with overall responsibility for TCF within your firm (this person will be required to take part in the assessment)
details of which FSA events you’ve attended in the last 18 months (roadshow, surgery, TCF Conference etc)

You’ll also be asked to email the documents below if they are relevant and available for your business (this may depend on the size and complexity of your firm):

TCF gap analysis (from the ‘planning’ stage)
your firm’s structure diagram
most recent compliance consultant’s report (if relevant)
most recent internal audit report (regulated business only)

Assessment format

The assessment, which follows the same format whether conducted face-to-face or over the telephone, takes between an hour and an hour and a half. An external consultant can also attend or listen in, but cannot answer questions on your behalf.

Records from telephone assessments already conducted show that the FSA may start by asking you to confirm how your firm is set up, its place in the distribution process and the lender/broker relationships you have. Thereafter a variety of often open ended questions will follow to establish whether your firm’s management approach is reflects a culture of treating customers fairly (Outcome 1). A simplified assessment process is used for sole adviser firms.

You will be given verbal feedback at the end of the assessment, which will be confirmed in writing to you within 10 working days. For more details about mini assessments, follow the links to the FSA FAQs at the end of this page.

Assessment questions

The sections below include example questions based on actual calls received by some intermediaries who undertook telephone assessments. We’ve broadly grouped these by ‘theme’ – however please note that these are not intended to be exhaustive and the approach and actual questions may differ.

Your understanding of TCF

What do you understand by TCF?
What does the fair treatment of customers mean to you?

Your progress with TCF, how you got there and who oversees it

Do you manage your own compliance?
What progress have you made on TCF?
Have any actions been prompted by our contact?
How did you identify gap areas?
Explain your ‘gaps’ rationale
What work have you done on your identified ‘gaps’?
How does this link to the outcomes?

Understanding and use of Management Information (MI)

What type of Management Information do you receive to ensure that customers are being treated fairly?
What Management Information does the firm have access to in order to measure the quality of advice given?

Financial promotion

Does the firm have any financial promotions?
When preparing financial promotions how does the firm ensure these are fair, clear and not misleading?

Sales and advice – including suitability and disclosure

Does the firm provide advice to customers?
How do you ensure that you capture all of the relevant customer information?
How do the firm’s advisers ensure that they are providing the customer with the most suitable product?
How does the firm make sure that the products being offered to customers are the right products?
How does the firm ensure that they are targeting the right customers?
How does the firm ensure that product disclosure literature is clear?
What type of customer records/client files do you keep?
Does the firm operate from a panel of mortgage lenders/insurers?

Training

Does the firm receive any training from lenders in respect of products?
Does the firm have a training and competence scheme?
Does the firm’s training and competence scheme cover all relevant members of staff?
Does the firm ensure that advisers maintain CPD records?
How do the firm’s advisers keep up with regulatory changes?

After-sales service

Does the firm have procedures in place to ensure that once a sale has been made clients receive an after-sales service?

Complaints and customer satisfaction

Does the firm use customer satisfaction questionnaires/surveys?
Does the firm have a complaints handling procedure?
How does the firm determine what a complaint is?
If the firm does receive complaints, how does it go about resolving these complaints?
Does the firm undertake any root cause analysis into complaints?
If so what action has been taken by the firm?

Remuneration/incentives

Is your income from sales commission based?
[Not asked based on our research, but another likely question might be: ‘What measures are you taking to ensure fair treatment of customers in relation to staff remuneration and incentive schemes?]

Getting through a TCF assessment

The key to getting through a TCF assessment is:

being able to demonstrate a good understanding of TCF
being able to give examples of TCF activity within your firm and of resulting consumer benefits

If there appear to be weaknesses in your responses to questions then it’s probably more likely that the FSA will ask to visit your firm.

We’ll be adding additional pages on what to expect from visits to smaller firms once more visits have taken place and we have further high level example data to share.

Regional assessments – find out more on the FSA website (opens new window)
Read FAQs on TCF Assessments on the FSA website (opens new window)

Themes emerging from FSA visits to larger retail firms

You can read about common themes that have emerged from FSA visits to larger retail firms by following the link below – some of these may ring true for smaller firms. For example the FSA has found that while firms often have lots of data relevant to Treating Customers Fairly they often don't use it to measure whether they are treating their customers fairly. They have also found too much focus on customer satisfaction, rather than fair treatment – and on process, rather than the Treating Customers Fairly Outcomes. Read more by following the links.

Meeting the 2008 deadlines – an update for firms on the FSA website
Download June 2008 FSA report ‘Treating customer fairly: progress update’ (PDF, 232K)

Rolling programme of roadshows during 2008

The FSA has committed to increase contact with small firms by writing to invite them to a series of interactive roadshows over the next three years. These are designed to help the FSA engage better with small firms and provide practical support. The FSA says that assessment by mini visits or telephone interviews will often follow these workshops.