In the final part of our series on the FSA's requirements for treating customers fairly Ian Jerrum looks at the areas of complaints, remuneration, management information and strategic change

Ensuring that any customer complaints are properly considered, investigated and addressed is a key part of satisfying the regulator's Treating Customers Fairly (TCF) requirements and is the fifth stage of the product lifecycle framework.

Broadly, the FSA is looking to see that firms have taken customers' views about fair treatment on board and responded in a way that is prompt, fair and easy to understand.

There are some specific issues to consider when conducting a gap analysis at the complaints stage. These include establishing whether complaints are handled constructively across the entire firm.

An assessment must also be made as to whether all expressions of dissatisfaction are recognised as complaints and duly logged in a complaint register and, critically, whether lessons are learned from the contents of this register.

Constructive questions to be asked might include whether sufficient resource is allocated to complaints (including the timely monitoring of trends), whether it is easy for customers to register dissatisfaction, andwhether complaints are fairly investigated, conflicts of interest sensibly managed and clear documentation produced.

The FSA singles out the following as examples of good TCF practice on complaints:

  • Communicating a clear complaints procedures to all staff
  • Providing appropriate training
  • Involving senior management directly
  • Resisting the temptation to focus predominantly on complaints from the most valuable customers
  • Avoiding the assumption that most complaints will be unfounded
  • Getting complaints handlers to review product literature
  • Accepting that complaints may increase as procedures for making and recording them are improved and simplified
  • Keeping clients informed of progress
  • Requiring senior level sign-off prior to closing complaint files.
  • The sixth stage is remuneration. The FSA has stressed the importance of using monetary rewards and benefits (and equally, promotion and recognition) to motivate not just sales staff but also those involved in customer service, product design, compliance and, of course, implementing TCF.

    The key issues for consideration here are the basis of remuneration, rewarding sales success without encouraging inappropriate selling, rewarding non-sales staff fairly and proportionately and building TCF into target setting and appraisal procedures.

    Good practice examples offered by the FSA on remuneration include introducing bonus schemes linked to customer satisfaction, reducing commission paid where quality standards are not met, and implementing bonus and salary reviews based on a "balanced scorecard" that includes customer retention.

    The seventh stage is management information (MI). Here the regulator recognises that different approaches will suit different sized firms, but stresses that simply monitoring sales, productivity and so on may not provide the necessary MI to ensure a firm is treating its customers fairly.

    Potential issues here include whether appropriate performance measures are in place to monitor TCF delivery. Firms must consider whether changes are implemented to improve TCF performance, whether management has taken steps to ensure it has the necessary MI to manage TCF, whether this information is communicated internally in an appropriate way, how MI is reviewed and whether conclusions are drawn and acted upon.

    The FSA's good practice examples on MI include gathering information on TCF at all stages in the product lifecycle rather than simply at the sales stage.

    The FSA also suggests that regular reports that include TCF criteria are made to management, especially where project teams are engaged in major change. Ideally, this would take the form of a monthly information pack containing reports from the compliance team, complaints trends, customer retention rates, customer feedback performance against customer service standards, staff and partner satisfaction surveys, mystery shopping results and press coverage.

    The final stage in the FSA's product lifecycle structure is strategic change. Here the regulator suggests TCF should always be taken into consideration when planning change.

    Change can be large or small scale and might include developments such as entering new markets or territories, undertaking mergers or acquisitions, total or partial disposals of the business, cutting costs, outsourcing, centralising or reducing staffing levels, implementing operational improvements or introducing new systems.

    The good practice examples offered here include customer research to help determine what services to offer, for example, advised or non-advised. They also include considerations such as the careful assessment of potential partner firms' values, expertise and quality of service, which must surely be a given for any professional firm.

    Customer needs
    The FSA goes on to cite product selection in its examples of good practice, suggesting this should be based on customer needs rather than on what the sales force believes it can sell.

    It is also essential to minimise the risk of confusing customers if a firm operates different brands and subsidiaries with different names to the parent firm.

    Having worked through all the stages in the product lifecycle described above and in the previously published part two of this feature, firms should address in a detailed action plan any gaps identified. An action plan should address items such as prioritisation of tasks, securing resources and accountabilities, definition of measures, identification of MI requirements and monitoring processes.

    Action planning can be implemented either as a separate TCF project or as part of a wider plan. The FSA's key consideration is that management take clear responsibility for tracking progress, making changes, monitoring outcomes and delivery, and identifying remedial action.

    To a certain extent much of what the FSA expects of firms in terms of TCF is common sense. What is important, however, is that a firm can demonstrate it has applied a structured approach to ensure no stone is left unturned. It must show how it takes a fresh and objective look at all aspects of its operations and that mechanisms are in place to ensure continued monitoring, review and follow-up. IT

    ‘Ian Jerrum is managing director of Searchlight Solutions

    This feature is based on materials available on Searchlight's market-leading e-learning system Tick

    Test yourself on TCF
    Q1. Name stages five to eight in the FSA's product lifecycle framework.

    Q2. List three examples of good TCF practice suggested by the regulator in relation to complaints.

    Q3. In what respect does the FSA suggest that incentivising sales staff needs to be handled carefully in a TCF context?

    Q4.Among the examples of good TCF practice provided by the FSA in relation to management information is the production of a regular information pack. Name three of the elements comprising this ideal pack.

    Q5.State two examples of good TCF practice cited in the context of strategic change.

    A1. Complaints, remuneration, management information, strategic change.

    A2. Any three from: a) communicating clear procedures to staff; b) providing appropriate training; c) direct involvement of senior management; d) not focusing just on the most valuable customers; e) not assuming complaints will be unfounded; f) getting complaints handlers to review product literature; g) accepting that complaints may increase as procedures improve; h) keeping clients informed; i) requiring senior sign-off prior to closing files.

    A3. To avoid encouraging the sale of inappropriate products.

    A4. Any three from: a) reports from compliance; b) complaints trends; c) customer retention rates; d) customer feedback performance against customer service standards; e) staff and partner satisfaction surveys; f) mystery shopping results; g) press coverage.

    A5. Any two from: a) customer research on services to offer; b) assessing potential partner firms' values, expertise and quality of service; c) selecting new products based on customer needs; d) not confusing customers with differently named brands and subsidiaries.