Treating customers fairly (TCF) should be engrained in your business. This includes being able to recommend suitable products for your target market and ensure your clients understand the financial products they are purchasing.
TCF Outcome 2 requires that financial services and products are designed to meet the needs of clients. To ensure the services and products you recommend are suitable for your clients, you need to understand those services and products and have some insight into the minds of the product providers who designed them.
The easiest way to do this is to read about the products and ask the product provider relevant questions. In addition to benefits and pricing, ask about the target market the provider had in mind when it developed the product. This forms part of performing an appropriate due diligence. By performing due diligence, you can determine whether a particular product will suit a client’s needs and circumstances.
A suitability analysis is also necessary to ensure a product and the advice you give are suitable for your client. Clients are unique and they have specific needs that cannot be met by every financial product, all of which are designed for a specific target market. To be able to match a product to a client’s needs, it is essential to understand the nature of the product and its potential risks.
When proposed changes to the General Code of Conduct become effective next year, you will not be able to recommend a product simply because you are authorised to offer it. For example, if you are licenced to offer endowments but not collective investments, and the appropriate solution for a client is a collective investment, you should not recommend an endowment. You will need to inform your client of this and advise him or her to seek advice from another authorised advisor.
By understanding your target market and client base, you can decide if you have the right product options or solutions for your clients’ needs. If you have limited tools in your toolbox, you may choose to seek additional product provider contracts.
In terms of TCF (Outcome 3), clients must receive clear information and be kept appropriately informed before, during and after you render financial service. If you have done your due diligences and understand the product, you are well positioned to provide clients with clear and appropriate information at all times.
In addition to giving your clients information, other documents and illustrations can also help them understand the products you are offering. Providing this material in a format suited to their level of financial literacy increases the chances that they fully understand the product and can make informed decisions.
When clients implement your recommendation, you should close the information loop with a detailed motivation in your Record of Advice as to why the recommended product suits their needs.
By placing clients at the heart of your business and doing all of the above, you will improve your chances of successfully defending a FAIS Ombud complaint against you. In conclusion, you must be able to identify your target market, understand your clients and ensure that you recommend suitable products for their specific needs. You cannot take the risk of recommending potentially unsuitable products to your clients just to make a sale, or because you have limited tools in your toolbox (i.e. limited product supplier agreements). TCF should play an integral role in your business, and you must ensure that your clients fully understand the products they are purchasing.