Treating Customers Fairly

The latest FSA initiative means the writing is on the wall for opaque sales processes and other Spanish customs. But Malcolm Small argues that TCF is also a source of market advantage for the strong and the brave.
I don’t suppose that too many financial services marketing people wake up in the morning and ask themselves what they can do to comprehensively maltreat their customers when they get to work. However, if you were one of the unhappy band of customers on the receiving end of such (admittedly, retrospective) triumphs in the Opaque Product of the Year award category – characterized by, for example, precipice bonds and split-capital investment trusts – you might reasonably conclude that such thoughts do occur. And, of course, there are mortgage endowments, withprofit bonds, Equitable Life and a host of other background sour tastes to choose from. It sometimes astonishes me that the industry so frequently continues to see itself as a victim in its relationship with the regulator, when all this is set in the context of customer perception. Of course, no financial product can ever be entirely risk-free, and there are companies around who have gone to great lengths to ensure that their products are presented in a way that customers stand a better than even chance of comprehending. We’ll revisit this topic later, but first, what is Treating Customers Fairly about?
Letters you’ll be hearing more of
The requirement, in a regulatory sense, to treat customers fairly, has been around since the dawn of UK financial services regulation in the late 1980s. In the operating principles laid down by the Financial Services Authority (FSA), Principle 6 states that “a firm must pay due regard to the interests of its customers, and treat them fairly”. From the point of view of the financial services
marketer, this one must surely be a no-brainer. Unfair treatment of customers will virtually ensure that you are never in a position to harvest that Holy Grail of lifetime customer value. So why does it even need to be expressed as a principle, never mind become the centre-piece for a major regulatory initiative?
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