Is it worth it?


Like all disciplines and areas of work, T&C changes and evolves over time in response to what the industry and regulators see as the current and emerging risks to customers, and to businesses.

At present there is a focus on the potential implications of the FCA’s new Consumer Duty requirements, aimed at meeting the obligation to “deliver good outcomes for retail customers.”

Some believe this means firms will need to move to a more regular assessment of their client-facing staff, involving various levels of technology. However, rather than heralding the death knell of traditional T&C, parts of that process will be more important than ever to support the FCA’s required outcomes of consumer support and consumer understanding.

I’m sure that what the FCA have in mind is not simply getting a client to sign a document to say that they understand everything, but rather to look for evidence from the advice process that this is in fact the case.

One way of achieving this is through observations, which is something that no amount of technology can accurately assess, regardless of the amount of artificial intelligence involved.

One way of achieving this is through observations, which is something that no amount of technology can accurately assess, regardless of the amount of artificial intelligence involved. However, despite the potential benefits for advisers, businesses and those who deal with the FCA on their behalf, there are challenges associated with observations, and some firm’s might wonder if it’s worth it.


1) Client Advice Meetings

The basis of observing a client advice meeting has changed over the past two years, with the effects of the pandemic meaning more observations have been undertaken digitally, either live via programs like Skype or Microsoft Teams, or via recordings that are later assessed.

One of the challenges for T&C supervisors has been the fact that, not only have some recording systems used been for voice only, but even with a video link, meetings have not flowed in the same way that they would in a face-to-face scenario. It has been a learning curve for all concerned, and while a lessening in Covid cases may mean more face-to-face observations do take place, I suspect remote observations will be a permanent feature of T&C for the future.

Apart from that, the challenge in the context of the Customer Duty requirements will be the focus on customer understanding, and the observation of a client advice meeting, rather than a fact-find, would be most appropriate.

This would allow T&C supervisors to assess the way information is provided, the explanations made by advisers and the analogies used to aid understanding. Supervisors will also be able to identify and address any learning points, and the process would be documented to supply evidence to the FCA of both the adviser’s and the business’s commitment to the Customer Duty requirements.

Also, part of the role of a T&C supervisor is to highlight and pass on both poor and best practice to those they supervise, so that the entire team improves its approach to the customer journey, including their understanding of the advice provided, the products, or services and fees.

However, another challenge is with new advisers, or firms that rely on new, rather than existing business, where client advice meetings can be relatively rare. Even recent studies suggest a lead to business conversion rate for new clients can be 20% or less. What that means in practice is that for every 10 fact finding meetings, there would be at most 2 client advice meetings available for observation.  Even with existing clients, where the ratio is higher, it is unlikely to be 100%.

The effect of this is that T&C supervisors have to be able to reorganise their otherwise carefully planned diaries, often at short notice, to accommodate the limited number of such opportunities.

2) Role Plays

This brings me to another possibility, and another challenge, the use of role plays. Love them or hate them, they are another potential tool to assess how well advisers explain things to customers. They can also be specifically tailored to focus on a particular area of understanding, where there are any general or individual concerns.

However, role plays are only as good as the scenarios used, and the people who play the part of a customer. One of the best role-plays I ever attended was where actors were used to play the part of the customer, so they were strangers to the adviser, and was closer to the reality of a new customer meeting. However, while that works well for fact-find meetings, where you want to re-create a client advice meeting, where the adviser and the customer already know each other, that distance in the relationship is not helpful.

Often therefore, such roles are played by others in the same firm, and often by the colleagues or managers of those being assessed, who will have real or unconscious biases towards both the adviser and the process.

3) Adviser or Business Resistance

I had been surprised, on more than one occasion, during my time as a T&C supervisor, by the effect that any form of observation can have on otherwise competent, articulate, professional advisers.

I was once introduced by such an adviser, to one of his good professional clients, as his Training and Incontinence Manager; not a role I aspired to.  On another occasion, an adviser I was observing told a group of employees the pension funds they invest in “went up and down, it’s not rocket science.” The feedback on both those observations was interesting to say the least, including a brief explanation of the fact that rockets do also go up and down, so another analogy might be better.

Let’s face it, it is a challenge to get advisers to buy-in to the observation process, and this can be made even worse by the attitude of parts of the business to T&C. Unfortunately, there were and may still be, those who job is to meet sales targets seeing T&C in all its forms as an intrusion into that process, rather than an integral part of it, ensuring customers and the business are protected.

Some of this depends on where T&C sits within a business. I have worked for different organisations that have placed T&C in HR, with an emphasis on the training, in the sales part of the business, with an emphasis on adviser improvement, and as part of the Compliance team, where the focus was on meeting the scheme requirements.

Of the three I prefer T&C to be part of the Compliance team, with the person responsible for that function not being part of the operational element of the business. In a larger firm, this could be a non-executive director, but the smaller the operation, the more difficult it is to separate the two.

Is it worth it?

So, despite all these challenges, do I still think that T&C and specifically the use of client advice observations or tailored role plays is a useful tool in the context of Customer Duty? Well, from my point of view the answer must be a resounding yes.

However, their usefulness does depend on the challenges I have outlined, and how well an individual firm can navigate its way around the various issues identified, including a realistic assessment of what is possible and what is not. For example, although the idea of employing actors to play the part of clients might seem to be an ideal way to deal with role plays, not every firm would see the use of their financial resources to pay for that as a worthwhile investment.

…….and Finally

The FCA has said it will expect firms to conduct reviews of how they deal with the risks related to retail customers. As part of that, if a risk is found that had not been accounted for previously, or if a potential risk is found, firms must act to reduce these and any associated risks. Used wisely, the so-called traditional T&C approach, including observations, can be an extremely useful tool to enhance a firm’s ability to find and deal with such risks.

Also, in the best analysis T&C can add to the ability of a firm to deliver FCA compliant solutions for clients, who then remain as customers for many years, generating income. At worst it can just be seen as a regulatory fine prevention process, but either way it can pay for itself, so it may as well be used wisely.


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Derek T Davies is a freelance Consultant,Editor and Writer

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