Provider – Distributor Responsibilities to TCF Dated September 2008

Friends Provident/Distributor TCF Responsibilities Background Guidelines for the sharing of Responsibilities between Friends Provident and its Distribution Partners to ensure the fair treatment of customers Friends Provident/Distributor TCF Responsibilities Responsibilities by Outcome Guidelines for the sharing of responsibilities between Friends Provident and its Distribution Partners to ensure the fair treatment of customers

Background Friends Provident is fully supportive of the FSA’s ‘Treating Customers Fairly’ initiative and strongly believe that our culture, values and business model are fully aligned with the requirements of the regulator. We have initiated a programme of projects across all areas of our business to ensure that TCF principles are embedded into the culture of our organisation A key consideration for the FSA is that there is clarity about the Responsibilities of product Providers and Distributors and that this is understood by all parties We have created this document with the intention of clearly defining these Responsibilities within the umbrella of our corporate values and operating model. This paper is structured around the FSA’s 6 Consumer Outcomes – describing for each what we believe are the key Responsibilities for Friends Provident and for our Distribution Partners Our expectation is that by being specific about our interpretation of the FSA’s requirements in respect of the split of Responsibilities, we will be removing doubt and adding much needed clarity to the debate on these issues. Guidelines for the sharing of responsibilities between Friends Provident and its Distribution Partners to ensure the fair treatment of customers

The Responsibilities of Providers and Distributors in ensuring the fair treatment of customers. “ Providers and Distributors should consider the impact of their action (or inaction) on the customer in various stages of the product life-cycle, or the various stages of provision of the service This will include addressing the fair treatment of customers at the following stages: Design and Governance Sales and Advice processes Identifying target markets Marketing and Promotion Complaints handling After-sales information and service Guidelines for the sharing of responsibilities between Friends Provident and its Distribution Partners to ensure the fair treatment of customers

Friends Provident – Distributor TCF Responsibilities On the following pages we describe our view of the split of Responsibilities between Friends Provident and our Distribution partners to support delivery the FSA’s 6 customer outcomes Each section aims to clearly distinguish between our Responsibilities and those we expect our Distribution partners to undertake. Further information can be obtained from your account manager Guidelines for the sharing of responsibilities between Friends Provident and its Distribution Partners to ensure the fair treatment of customers

Friends Provident Responsibilities Distributor Responsibilities Outcome 1 Consumers can be confident that they are dealing with firms where the fair treatment of customers is central to the corporate culture Friends Provident Responsibilities Distributor Responsibilities Ensuring that effective MI systems and monitoring are in place to assess that customers are being treated fairly To adopt a performance management and remuneration strategy which rewards positive TCF behaviours and takes meaningful action where these are not demonstrated. To Regularly review consumer contracts to ensure terms are fair, clear and not misleading. To drive the implementation & embedding of TCF from the top down Ensuring the advice process and adviser & staff remuneration & incentivisation are consistent with and encourage TCF behaviour To notify Friends Provident promptly of potential instances of unfair customer treatment caused by a RI and to co-operate fully with us in resolving the issue to ensure a satisfactory outcome for the customer TCF is a cultural issue and should be driven from the top with demonstrable commitment from senior managers TCF should be reflected in approach taken to human resources and reward, determining corporate strategy and drafting consumer contracts Senior managers should receive Management Information that enables them to assess whether customers are being treated fairly TCF, rather than simply being about process, should translate into practical outputs in the shape of fair outcomes for consumers Guidelines for the sharing of responsibilities between Friends Provident and its Distribution Partners to ensure the fair treatment of customers

Friends Provident Responsibilities Distributor Responsibilities Outcome 2 Products and services marketed and sold in the retail market are designed to meet the needs of identified consumer groups and are targeted accordingly Friends Provident Responsibilities Distributor Responsibilities Provide Distributors with details of the intended market for each relevant product; aiming to co-ordinate with any regular product review cycles To clearly identify the target market on product literature and to ensure that all sales material and presentations to advisers explain what the target market is To stress-test products to identify how they might perform in a range of market environments and how the customer could be affected (unless product has no potential variance in performance) To have effective monitoring & MI in place to enable a review of whether actual sales through Distributors reflect the target market any product was designed for and to communicate any variance to Distributors To supply accurate and timely management information in a standard format and at an agreed frequency. Ensure that all appropriate Friends Provident products are assessed for approval on any Recommended Product List as part of a regular Product Review Cycle To ensure that the approval process for products/Providers and panel selection will make due consideration of the TCF requirements To review the panel position of any product at, or prior to, launch (or significant amendment) or in reaction to adverse news flow Using the information supplied by Friends Provident, to confirm the intended target market for which products are suitable on all product fact sheets/bulletins produced by the Distributor Products and services need to be designed with the intended market in mind and need to be targeted appropriately Monitoring/MI Guidelines for the sharing of responsibilities between Friends Provident and its Distribution Partners to ensure the fair treatment of customers

Friends Provident Responsibilities Distributor Responsibilities Outcome 3 Consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale Friends Provident Responsibilities Distributor Responsibilities To take all reasonable steps to ensure that information contained on illustration systems is accurate and to rectify errors promptly. To ensure that all literature/media – customer facing or otherwise – is technically accurate, clear and not misleading To proactively communicate with customers in advance of options becoming exercisable on their product or of changes to product terms and conditions. To test product literature with customer groups for clarity and depth of understanding. Check that information given to Distributors is sufficient to enable them to understand the product/proposition enough to be able to give suitable advice To ensure that all literature/media in relation to products is written with the target market in mind and is understandable To keep current all literature/media available to customers/advisers and to remove obsolete stock from circulation as soon as practicable. Make clear that information designed for Distributors should not be used with customers Keep Distributors informed of changes to its funds or services To understand the products being made available by Friends Provident and to ensure that advisers are trained to accurately represent these products to customers. To be satisfied that Friends Provident has taken sufficient care to ensure that customer facing literature is clear and not misleading Not to use any customer facing material from Friends Provident unless the Distributor is satisfied as to it’s technical accuracy. To ensure that literature labelled “for adviser use only” is not made available to customers. Where communication from Friends Provident to the customer is via the Distributor, to promptly pass such communication to the customer All financial promotions should be clear, fair and not misleading Effective point of sale disclosure is essential Training of advisers Post sale disclosure ensures that customers are kept aware of product performance, their opportunities to act at certain points in the product lifecycle and changes to terms and conditions Guidelines for the sharing of responsibilities between Friends Provident and its Distribution Partners to ensure the fair treatment of customers

Friends Provident Responsibilities Distributor Responsibilities Outcome 4 Where consumers receive advice, the advice is suitable and takes account of their circumstances Friends Provident Responsibilities Distributor Responsibilities To take all reasonable steps to ensure that information contained on Provider or third-party quote systems is accurate and ensure errors are corrected promptly Accurate and clear product information is provided to Distributors and is kept up-to-date We will develop a standard report of MI that helps Distributors to assess the quality of advice given and identify any problems, such as persistency, cancellations, claims upheld rates, etc Ensure that advice given by advisers and products sold are suitable for clients’ needs & risk appetite Ensure that an approved Training & Competence scheme regime is in place for all advisers Ensure that advisers fully consider their clients needs and circumstances when providing financial advice Ensure that advisers have access to appropriate product information to enable them to properly advise their clients Provide high quality learning events to help advisers develop relevant and topical knowledge and skills Carry out themed reviews to check the suitability of advice provided by its advisers on ‘high risk’ products Advice must reflect consumers’ needs, priorities and circumstances Guidelines for the sharing of responsibilities between Friends Provident and its Distribution Partners to ensure the fair treatment of customers

Friends Provident Responsibilities Distributor Responsibilities Outcome 5 Consumers are provided with products that perform as firms have led them to expect, and the associated service is both of an acceptable standard and as they have been led to expect Friends Provident Responsibilities Distributor Responsibilities To stress-test products during development and the subsequent product lifecycle (where relevant) To periodically monitor product performance where this may vary materially during the product lifecycle to check whether it is continuing to meet the needs of the target market it was designed for and to take appropriate action to rectify any variance. To monitor SLAs & other product performance benchmarks agreed in the contract and to take action to correct any variance. To request transaction based feedback from customers in relation to the service that they have received from Friends Provident and Distributors To process post sale amendments or information requests promptly and accurately To fairly and accurately represent our products and services to customers and to not create any expectation which is not supported by Friends Provident. To consider factors such as fund performance, claims triggers, claims history, complaints information, product incentives when assessing products for suitability. To research Provider service levels as a core element of the product selection process To monitor the delivery of ongoing client service/advice and to take meaningful action where this falls short of an acceptable standard Being clear about the product/service being provided and the range of possible results and experiences for the consumer Stress testing Consumers can be fairly treated even if the product they purchase performs poorly Guidelines for the sharing of responsibilities between Friends Provident and its Distribution Partners to ensure the fair treatment of customers

Friends Provident Responsibilities Distributor Responsibilities Outcome 6 Consumers do not face unreasonable post-sale barriers imposed by firms to change product, switch Provider, submit a claim or make a complaint Friends Provident Responsibilities Distributor Responsibilities To provide a post-sale customer service, including handling claims or maturity/surrender payments in accordance with the product specification and consistent with any expectations created in the customer's mind through the product information provided. To, fairly and promptly, investigate and respond to any customer complaints regarding the products and services we provide. To pass all complaints regarding the advice/sales process of a Distributor promptly to that Distributor. To monitor the root cause of customer complaints and to take action to address recurring issues To provide a post-sale customer service, including handling claims or maturity/surrender payments in accordance with any expectations created in the customer's mind through the sales/advice process and consistent with the terms of business provided. To, fairly and promptly, investigate and respond to any customer complaints regarding services provided. To pass all complaints regarding Friends Provident products and/or services promptly to Friends Provident Post-sale barriers to fair treatment can be cultural, contractual or competitive The consumer ought to be able to change products or switch Providers without incurring excessive penalty Firms should not make it unnecessarily difficult for consumers to make claims or to complain when something goes wrong Guidelines for the sharing of responsibilities between Friends Provident and its Distribution Partners to ensure the fair treatment of customers