Firms must do more to ensure their Appointed Representatives treat customers fairly
3rd December 2007A review by the Financial Services Authority (FSA) has found that firms are not doing enough to ensure that their Appointed Representatives (ARs) are treating customers fairly in the sale of general insurance, mortgage and investment products.
As a result four firms are being considered for referral to enforcement, and follow-up visits will be made early next year to 11 firms identified as needing significant remedial action to see that they have addressed failings identified.
The review, conducted over the last few months and mainly involving smaller firms, follows a similar project carried out in 2006. Many of the concerns identified then have not been adequately addressed. Across the four areas reviewed - Systems and controls, Recruitment, Training and Competence and Treating Customers Fairly - the poorest standards overall were found within general insurance firms, with a better picture in the mortgage sector and with the highest standards seen in investment firms.
Key concerns include firms' written procedures not being followed in practice; too much reliance placed on the remote checking of client files as the sole method of monitoring ARs; poor progress with Treating Customers Fairly with ineffective communication to ARs; and not having appropriate management information or measures in place to test whether ARs are delivering the Treating Customers Fairly consumer outcomes and working towards the end of December 2008 deadline.
Firms need to ensure that the ARs they recruit are fit and proper and that their customer-facing staff have the necessary knowledge and competence to sell and advise. They also need to ensure that their ARs understand that they should treat customers fairly before, during and after the point of sale.
Stephen Bland, Director Small Firms Division, FSA said:
"It is disappointing that failings still persist despite the help and information available from the FSA. We have set a deadline of end December 2008 by which time we expect all firms to be able to demonstrate that they are achieving the six TCF outcomes. Principal firms therefore need to act now to ensure that they have appropriate controls in place and management information that enables them to be confident ahead of the deadline that their ARs are treating their customers fairly."
