Treating Customers Fairly

If Treating Customers Fairly is implemented.

The future of our industry could look like this

Treating Customers Fairly

Unfair treatment of clients Long-term nature of financial services Information asymmetry Lack of financial education

Treating Customers Fairly (UK)

Outcomes based legislation
Now includes some detailed rules And guidance including case studies

Education of customers
Elevate level of financial literacy in customers

Make unfair treatment too expensive through

Intense enforcement Credible deterrents

Six TCF Outcomes

1. Consumers can be confident they are dealing with firms where the fair treatment of customers is central to the corporate culture (Consequence of rest of the outcomes)

TCF Outcome 2
Products and services marketed and sold in the retail market are designed to meet the needs of identified consumer groups and are targeted accordingly

TCF Outcome 3
Consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale

TCF Outcome 4

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

TCF Outcome 5
Consumers are provided with products that perform as firms have led them to expect, and the expect, associated service is both of an acceptable standard and what they have been led to expect

TCF Outcome 6
Consumers do not face unreasonable postpost-sale barriers to changing product, switching provider, submitting a claim or making a complaint

Treating Customers Fairly (SA)

FSB released a discussion paper in May 2010 ASSA have given written comment through the TCF Task Force Team Workshop TCF vision and program details

Value Chain
Product Design Promotion & Marketing PostPoint of Sale

Advice

Point of Sale

Complaints Resolution

Culture, Strategy and Behaviour Impacted

Impact of TCF
Go for a business that any idiot can run - because sooner or later, any idiot probably is going to run it. it. Peter Lynch

TCF Myths
Compliance
Actively promote fairness throughout the value chain

Just reasonable benefit expectations

Looks through info asymmetry to providers

Being nice to clients

Unrealistic expectations not met Happy, but ignorant happy clients not acceptable

Once-off job
Requires continuous process Requires high commitment from senior levels

Impact of TCF
Leadership Strategy Decision Making Controls erformance Mgt Reward Understand and implement Vision, values & implementation Staff able to challenge Management Information Evaluated on TCF Reward for consumer outcomes

Challenges of TCF
Beyond compliance a culture change What exactly is fair? Developing MI FSB ability to regulate

TCF and Pension Environment

Pension Fund Adjudicator FAIS Act PF Circular 130 Fiduciary Responsibility Actuarial Code Professional Guidance Notes

TCF Issues
Who is the customer?
Trustee or member or both?

Will retirement funds have to comply?

Could trustees be prosecuted?

Role of the valuator

Fairness and Financial soundness

Role of the Principal Officer

Fairness officer?

TCF Issues
Independent advisors, consultants and actuaries?
Lets see your strategy and MI

What is in a name?
Name confusion unfair?

Could MLIC and Lifestage investment models be unfair? When does bad service become unfair?

Implementing TCF
Whenever there is a hard job to be done I assign it to a lazy man; he is man; sure to find an easy way of doing it. it. Walter Chrysler

Implementing TCF
Buy in from senior management Incorporate into strategic planning Formulate targets and measurements Incorporate into performance measurement Review of incentive structures Education and communication

TCF Risk Areas

Retirement Annuities
Not according to client need Charges not disclosed Termination conditions not disclosed Insufficient comparison Risks not highlighted

TCF Risk Areas

Products Sold at Exit Retirement annuity at retirement Preservation fund at withdrawal Insufficient choice and comparison Exit documentation misleading

TCF Risk Areas

Investments
Layers of undisclosed costs Performance mis-represented Not correct match for profile of membership Termination penalties only discovered at termination Performance does not meet expectations!

TCF Risk Areas

Service Provider Comparisons
Small section of the market Terms and conditions not checked Service not considered Termination conditions ignored Fee sharing arrangements not disclosed and explained

TCF Risk Areas

New Business Promises Unsupported service claims Unsupported capabilities Lack of delivery after business is secured

TCF Risk Areas

Valuators Role
Financial soundness not mean fairness Inappropriate benefit designs Outsourcing of pensions Conversions and surplus Performance does not meet expectations! Changes in risk benefit design

TCF Conclusion
Culture of fairness through regulatory framework Consumer financial education and literacy Culture, strategy and implementation Risk areas to be explored further

Summary of TCF
Our mission statement about treating people with respect and dignity is not just words but a creed we live by every day. day. You can't expect your employees to exceed the expectations of your customers if you don't exceed the employees' expectations of management. management. Howard Schultz

Thank You