Treating Customers Fairly (TCF): Principles Every Advisor Must Follow

The Treating Customers Fairly (TCF) framework is one of the most significant regulatory developments in South African financial services. Introduced by the Financial Sector Conduct Authority (FSCA), TCF shifts the regulatory approach from prescriptive, rules-based compliance to an outcomes-based model that demands demonstrable fair treatment of customers at every stage of the product lifecycle.

For financial advisors, representatives, and Key Individuals, TCF is not optional — it is a core regulatory expectation that influences everything from product selection to complaints handling. Understanding TCF is also essential for anyone preparing for the RE5 or RE1 regulatory examinations, where TCF principles are tested extensively.

What Is Treating Customers Fairly?

TCF is a regulatory framework that requires financial institutions to demonstrate that they deliver specific fair outcomes for their customers. Rather than prescribing detailed rules for every situation, TCF sets out six broad outcomes and expects firms to prove they are achieving them.

The philosophy behind TCF is straightforward: if firms genuinely treat their customers fairly, many of the problems that regulators traditionally address through prescriptive rules will not arise in the first place.

TCF draws on similar frameworks developed internationally, particularly the UK Financial Conduct Authority's Treating Customers Fairly initiative. The FSCA adapted these principles for the South African market, recognising the unique challenges of a developing economy with significant financial literacy gaps.

The Six TCF Outcomes

The six TCF outcomes form the backbone of the framework. Every financial service provider must demonstrate that its business practices deliver these outcomes consistently.

Outcome 1: Culture of Fairness

"Customers can be confident that they are dealing with firms where the fair treatment of customers is central to the firm's culture."

This outcome addresses the organisational culture of financial service providers. It requires that fairness is not merely a compliance exercise but a genuine value embedded in the firm's:

• Leadership behaviour — directors and senior management must visibly champion fair treatment
• Strategic planning — business strategies must consider customer impact
• Performance management — staff incentives must not encourage unfair treatment
• Internal communication — fairness messaging must be consistent and authentic
• Recruitment and training — new hires must be selected and trained with TCF in mind

Practical application: A firm that pays its advisors significantly higher commissions on complex products creates an incentive structure that conflicts with Outcome 1. The culture of the firm implicitly encourages advisors to recommend complex products even when simpler alternatives would better serve the client.

Outcome 2: Products Designed to Meet Customer Needs

"Products and services marketed and sold in the retail market are designed to meet the needs of identified customer groups and are targeted accordingly."

This outcome addresses product design and distribution. It requires that:

• Products are designed with specific customer segments in mind
• The features, risks, and limitations of products are appropriate for the target market
• Products are not distributed to customers outside the intended target market
• Product reviews are conducted regularly to ensure ongoing suitability
• Post-sale monitoring tracks whether products continue to meet customer needs

Practical application: An investment product with a 10-year lock-in period should not be marketed to retirees who may need access to their capital for living expenses. The product must be designed for — and sold to — customers whose circumstances align with its features.

Outcome 3: Clear and Appropriate Information

"Customers are provided with clear information and are kept appropriately informed before, during, and after the point of sale."

This outcome focuses on communication and disclosure:

• Pre-sale information must be clear, accurate, and sufficient for informed decision-making
• Product documentation must be written in plain language, avoiding unnecessary jargon
• Ongoing communication must keep customers informed about material changes
• Marketing materials must not mislead or create unrealistic expectations
• Fees and charges must be disclosed prominently and transparently

Practical application: A policy document that buries exclusions in fine print on page 47 fails Outcome 3 even if the information is technically disclosed. The test is whether a reasonable customer would understand the key terms, not whether the information exists somewhere in the documentation.

Outcome 4: Suitable Advice

"Where advice is given, it is suitable and takes account of customer circumstances."

This is arguably the most directly relevant outcome for financial advisors and representatives:

• A thorough financial needs analysis must be conducted before advice is given
• Advice must be appropriate for the customer's financial situation, goals, risk tolerance, and existing provisions
• The reasons for recommendations must be documented and provided to the customer
• Advisors must consider alternative products and explain why the recommended product is the most suitable
• Ongoing suitability must be reviewed where there is a continuing relationship

Practical application: Recommending a high-risk equity portfolio to a conservative retiree because it pays a higher commission is a clear violation of Outcome 4. The advice must be driven by the client's needs, not the advisor's remuneration.

Outcome 5: Product Performance and Service Quality

"Products perform as firms have led customers to expect, and the associated service is of an acceptable standard and as customers have been led to expect."

This outcome addresses the post-sale experience:

• Products must deliver the benefits that were represented during the sales process
• Service levels must be maintained throughout the product lifecycle
• Claims handling must be fair, efficient, and transparent
• Investment performance communications must be honest and not misleading
• Customers must receive value for money relative to the fees charged

Practical application: An insurer that aggressively markets its claims service as "fast and hassle-free" but routinely delays claims payments or rejects claims on technicalities fails Outcome 5.

Outcome 6: No Unreasonable Barriers

"Customers do not face unreasonable post-sale barriers imposed by firms to change product, switch provider, submit a claim, or make a complaint."

This outcome protects customers from being trapped or frustrated after purchase:

• Switching and cancellation processes must be straightforward and clearly communicated
• Complaints procedures must be accessible, responsive, and fair
• Claims processes must not impose unnecessary documentary requirements or procedural hurdles
• Exit fees and penalties must be reasonable and clearly disclosed at point of sale
• Customer service must be accessible through multiple channels

Practical application: A medical aid scheme that makes it extremely difficult to downgrade a plan — requiring multiple forms, extended waiting periods, and repeated phone calls — creates an unreasonable barrier that violates Outcome 6.

FSCA Expectations for TCF Compliance

The FSCA expects financial service providers to go beyond simply understanding TCF principles. Firms must demonstrate active implementation through:

Governance and Oversight

• Board-level accountability for TCF outcomes
• Regular TCF reporting to senior management and governance structures
• TCF-specific risk assessments integrated into the firm's risk management framework
• Internal audit reviews of TCF compliance

Management Information

Firms must collect and analyse data that demonstrates TCF compliance:

• Customer complaint volumes, types, and resolution times
• Product persistency and lapse rates
• Claims rejection rates and reasons
• Customer satisfaction scores
• Advice suitability review outcomes
• Staff turnover and training completion rates

Staff Competence and Training

• All staff must receive TCF training appropriate to their role
• Training must be ongoing, not a once-off exercise
• Performance assessments must include TCF-related criteria
• Staff must understand how their specific role contributes to TCF outcomes

Product Design Fairness

TCF Outcome 2 has significant implications for how financial products are designed, approved, and distributed:

Product Approval Process

Firms should implement a formal product approval process that includes:

1. Target market identification — who is the product designed for?
2. Needs assessment — what customer need does the product address?
3. Feature-need alignment — do the product features match the identified needs?
4. Risk assessment — what risks does the product pose to the target market?
5. Distribution strategy — how will the product reach the target market?
6. Post-sale monitoring plan — how will the firm track whether the product delivers fair outcomes?

Product Review

Existing products must be reviewed regularly to ensure they continue to deliver fair outcomes. Reviews should consider:

• Whether the product still meets the needs of its target market
• Whether customer complaints indicate systemic fairness issues
• Whether the product's costs remain competitive and reasonable
• Whether changes in legislation or market conditions affect the product's suitability

Clear Communication Standards

Achieving Outcome 3 requires attention to communication at every customer touchpoint:

Plain Language Requirements

• Use short sentences and familiar words
• Define technical terms where they cannot be avoided
• Use headings, bullet points, and tables to improve readability
• Highlight key information such as exclusions, fees, and risks
• Test communications with representative customer groups

Key Information Documents

For many products, firms should provide a summary document that highlights:

• What the product is and what it does
• Key benefits and features
• Key risks and limitations
• Total costs and fees
• How to make a complaint or claim

Complaints Handling Under TCF

TCF Outcome 6 places significant emphasis on effective complaints management:

Requirements for Complaints Processes

• Complaints must be acknowledged promptly (ideally within 24-48 hours)
• A clear timeline for resolution must be communicated to the customer
• Complaints must be investigated thoroughly and objectively
• The outcome and reasoning must be communicated clearly to the customer
• Customers must be informed of their right to escalate to the FAIS Ombud or relevant ombudsman
• Root cause analysis must be conducted to identify and address systemic issues

Using Complaints Data

Complaints are a valuable source of management information for TCF purposes:

• Trend analysis can reveal systemic fairness issues
• Product-specific complaints may indicate design or communication problems
• Advisor-specific complaints may indicate training or supervision needs
• Resolution times indicate the effectiveness of the complaints process

Monitoring and Reporting

TCF Dashboards

Leading firms develop TCF dashboards that track key metrics across all six outcomes:

Outcome	Key Metrics
1: Culture	Staff training completion, ethics violations, whistle-blower reports
2: Product design	Product review completion, target market breach incidents
3: Information	Communication readability scores, disclosure compliance
4: Suitable advice	Advice file review results, needs analysis completion rates
5: Performance	Claims ratios, customer satisfaction, complaints volumes
6: No barriers	Complaints resolution times, switching/cancellation volumes

Regulatory Reporting

The FSCA may request evidence of TCF compliance during on-site visits, thematic reviews, or in response to specific concerns. Firms must be able to demonstrate their TCF efforts with documented evidence, not just policy statements.

Practical Implementation Tips

For Individual Advisors

1. Always complete a thorough needs analysis — this is the foundation of suitable advice
2. Document everything — your advice record is your primary TCF evidence
3. Explain clearly — use language your client understands, not industry jargon
4. Disclose all costs — including commissions, administration fees, and any other charges
5. Follow up — check that products continue to meet your client's needs over time
6. Handle complaints professionally — view complaints as opportunities to demonstrate fairness

For Key Individuals and Managers

1. Set the tone from the top — make TCF a regular agenda item in team meetings
2. Review advice files regularly — ensure advice quality meets TCF standards
3. Monitor complaints trends — look for patterns that indicate systemic issues
4. Invest in training — ensure all staff understand their TCF obligations
5. Challenge incentive structures — ensure remuneration does not drive unfair outcomes
6. Report to governance structures — keep the board informed of TCF performance

How Regulatory Exams Can Help

TCF is a heavily tested topic in both the RE5 and RE1 regulatory examinations. Questions often present real-world scenarios and ask you to identify which TCF outcome is relevant or how a particular practice fails to meet TCF standards. Mastering TCF requires practice, not just reading — and that is exactly what Regulatory Exams delivers.

• Practice exams include extensive TCF scenario questions that test your ability to apply the six outcomes to realistic situations, building the analytical skills the exam demands
• Quiz Builder lets you create dedicated TCF quizzes, isolating each outcome so you can master them individually before tackling integrated scenarios
• Analytics dashboard shows your performance across all TCF-related questions, revealing whether you truly understand each outcome or just recognise the terminology
• Weak areas analysis identifies which specific TCF outcomes you struggle with — perhaps you are strong on Outcome 4 (suitable advice) but weak on Outcome 2 (product design) — so you can focus your study time effectively
• Bookmarking allows you to save the trickiest TCF questions for repeated practice until the principles become second nature
• Leaderboards help you gauge your TCF readiness relative to other candidates, providing motivation and realistic expectations

Get started with the Free tier to explore TCF practice questions, upgrade to the Pro Simulator at R99 for 30 days for full exam simulations and comprehensive analytics, or choose the 1 Year Mastery bundle at R299 once-off that adds the complete Interactive Study Course and a full year of access. Both paid plans are one-time payments — no subscriptions, no auto-renewals. Whatever your plan, Regulatory Exams equips you with the TCF knowledge that examiners — and the FSCA — expect you to demonstrate.

Sign up free at regulatoryexams.co.za and practise the six TCF outcomes in real exam scenarios today. Find out which outcomes you can apply confidently and which still catch you out, then close the gap before you sit the exam — free to start, no card required.