Project identifies where companies aren’t making the grade
The inability to assess or provide appropriate evidence of how a firm is meeting its TCF obligations, especially where responsibilities for the customer’s end-experience are shared by different entities;
Conflicts of interest between a company’s commitment to TCF and its other goals are not adequately identified, analysed or managed; and
Some companies are just waiting passively for the TCF legislation.
requirement: Products and services marketed and sold in the retail market must be designed to meet the needs of identified customer groups and must be sold to the correct customers. The problems and risks to outcome two include:
Products are sold to customers for whom they are unsuitable and not intended. Little feedback is obtained directly from customers when products are designed.
Distribution channels or strategies may be inappropriate for products or the targeted customers, because the choice of distribution channel is not always considered together with the product design.
The bundling of products and/or services or the offering of excessive incentives to customers leads to inappropriate or unnecessary sales. This includes things such as loyalty programmes where one product is dependent on another, and it is difficult to disentangle the products when a customer wants to withdraw from one of them. Some firms simply assume that loyalty or add-on benefits are always good for customers.
The risk profile of a customer group does not match that of the product – not enough is done to check affordability and understanding.
The product provider does not understand or monitor the risks of the product.
Products are launched without appropriate after-sales support and
service structures being put in place.
requirement: You are given clear information and are kept appropriately informed before, during and after you contract for a financial service or product.
The problems and risks to outcome three include:
Promotions are not clear or mislead consumers, and customers do not understand the product information aimed at them. There is a strong focus on legal and technical issues when signing off marketing material, with little actual customer testing.
Customers do not receive the key information they need to make an informed decision about a product at the right time, or the essential information is not appropriately highlighted.
Inadequate after-sale information is provided about the performance of a product, its risks and what after-sale services are available; or the information on what action is required from a customer is inadequate.
requirement: The advice you receive must be suitable and take account of your circumstances.
The problems and risks to outcome four include:
Product suppliers often do not satisfy themselves that the intermediaries with whom they contract understand the products they sell and on which they give advice. Where independent brokers are used, many product suppliers believe they have no responsibility at all in this regard, and it is enough if the broker is licensed in terms of the Financial Advisory and Intermediary Services (FAIS) Act.
Sales incentives and targets skew the quality of advice – advisers take more account of the commissions they will earn than the best interests of customers. Many firms simply say they comply with commission and FAIS Act regulations, and need not do more.