This article explains why some financial services companies are still not treating their customers fairly though not for want of trying. Stressing that customer satisfaction is not the same as treating the customers fairly, the author uses the UK scenario to elaborate what was done there, what needs to be corrected and what are the best practice tips firms can employ.

1. Customer Focus
Treating Customers Fairly –
Not a simple task!
Mr Stephen Rosling of TCF Matters explains why some financial services
companies are still not treating their customers fairly though not for want of trying.
Stressing that customer satisfaction is not the same as treating the customers fairly,
he uses the UK scenario to elaborate what was done there, what needs to be
corrected and what are the best practice tips firms can employ.
L
et’s start with a little history…. • Or maybe they thought that regulation alone was enough
Back in the summer of 2001, the UK Financial to change the culture of organisations.
Services Authority (FSA) issued a discussion paper en- • Or was it all of the above?
titled “Treating customers fairly after the point of sale.” The
catalyst had been the new Financial Services and Markets Whatever the reason, it is clear that change was, and
Act and the key point of discussion was how to achieve remains, needed. Customers around the globe would tes-
the objective of “protecting consumers.” tify to this – even those that have not been mis-treated by
Over the next few years, the FSA entered into various financial services firms.
And, rightly or wrongly, (or fairly or unfairly), a significant
discussions and consultations with industry bodies, con-
proportion of people continue to put insurance, banks, bro-
sumer organisations and financial services firms. In fact,
kers, and pension companies all under the same umbrella.
the FSA published 18 discussion documents over the course
This lack of trust and differentiation was highlighted
of seven years up to the end of 2008 - this did not include
in the 2012 Edelman Global Trust Barometer where banks
case studies, guidance publications, cluster reports, speeches
and financial services remain firmly rooted at the bottom
and press releases. So there was no excuse that it would be
on 47% and 45% respectively (both results were worse than
a surprise. By the end of 2008 firms were expected to have
those in 2011).
reporting mechanisms in place that would provide evidence
So, we are left with some key questions:
that their customers were being treated fairly.
• What do insurance companies need to do to create,
build, (and restore?), trust with their customers?
Why were the firms not ready? • How will their customers know what changes they have
However, over the following two years, the FSA fined 23 made?
organisations approximately GBP14.5 million (US$23.2 mil-
lion) as a direct result of not treating customers fairly. (There To help understand the answer to these questions, it
were also several bans and public censures). Interestingly, is worth trying to understand where the FSA and banks
the list of 23 did not include a single bank. went wrong and, (if only by association), where the rest of
So, after seven years of consultation and planning, why financial services went wrong. I have picked three key areas
were firms not ready, and not able to comply with the new to discuss, however, there are others.
requirements? Was it because:
• Firms and the industry did not understand what was Controls, controls, controls
meant by “fairness” (and how this differed from satisfac- Consciously or not, it seems that many organisations de-
tion). voted significant resources and time into developing TCF
• The FSA did not understand what they meant by “treat- related processes and controls, at the expense of enough
ing customers fairly”. time being spent on behaviours.
• The industry did not think the FSA would enforce TCF. Cottage industries quickly developed, focussing sig-
nificant amounts of time and resources on the monthly
compilation of Board MI (management information) packs.
It was not unheard of for organisations to produce multiple
reports each month totalling around 50 pages of A4.
I am sure you can imagine the layers of people and
processes required to produce this each month - systems,
procedures, resources, checks, double-checks, all had to be
in place. And this was just the tip of the iceberg – reporting
of TCF related data was often duplicated and triplicated in
separate risk management and compliance reports.
So, what were the consequences?:
• There was a distinct culture of “copy and paste” from
month to month because everyone knew that senior
directors had no time, (and maybe not enough interest?)
to read the reports.
• The next reporting cycle would commence almost as
soon as the previous one had completed.
• There was not enough time spent on cultural work.
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2. Customer Focus
Top tips
So, what are some of the best practice tips that firms should be employing to demonstrate to themselves, and to
their regulator, that the fair treatment of customers is central to the corporate culture?
My top tips for making TCF part of the culture:
Design a performance
Review your employee Provide annual staff management process that
recruitment and training and testing on includes TCF objectives.
selection criteria. the principles of TCF. Reward the right behaviours.
Develop and maintain a comprehensive Measure the extent to
employee communication and which customers view you
engagement programme. as “fair and trustworthy”
Visible and sustained Identify and deal with Publish MI that
leadership. (Action speak customer issues quickly demonstrates all
louder than words.) and effectively. the above.
• And lastly, but most importantly, issues impacting on Resources were identified, project teams mobilised, com-
customers were not progressed with appropriate pace. munication programmes developed and the project sponsor
The key point is that TCF was simply being seen and would, in many instances, be the CEO.
managed as a reporting “tick box” exercise. The focus (con- The problem, however, is that TCF cannot simply be
scious or otherwise) was on the process, not the content implemented like a project – cultural change takes consid-
and not on the customer. erably longer than most projects and requires its own set
of skills. And the most fundamental difference between
What’s the difference between customer project management principles and the principles of culture
satisfaction and fairness? change? A project has a clear end date.
This, unfortunately, is not a joke question! This issue con- So, when the project ended (somewhere between six
sumed vast amounts of time and discussion with no real and 18 months) the project teams disappeared, the CEO
definitive conclusion. And that’s because fairness is con- moved onto something else (if indeed they had not already
siderably more difficult to define (and then measure) move on) the next project came along, and priorities
than satisfaction. changed. TCF took a back seat and was delegated
What the FSA were unable to provide, but downwards.
what the industry really wanted, was a And in even in those organisations
definitive meaning of fairness. And this which continued to place a priority on
is where it got even more difficult – what TCF, the governance model they sub-
you think is fair may not be the same sequently adopted was often itself the
as what the customer thinks. reason why TCF was not truly embed-
It was also clear that many firms ded. Consider these two scenarios:
put greater emphasis and priority on Firm A: A senior single TCF champion,
customer satisfaction surveys. These with support from a virtual team of
often painted a very positive picture, but part-time TCF “ambassadors”, representing
given the level of fines being raised it would all parts of the business, and with overall
not be unreasonable to think twice about an responsibility for all things TCF.
organisation that, on the one hand speaks very pub- Firm B: A centrally managed team of 15 full-time
licly about the importance of customer care, yet at the same staff, sat within an Operational Risk department, respon-
time is fined and penalised for not treating customers fairly. sible for all things TCF.
In fact, there has been a very recent example of this All things being equal, which one would suggest that
behaviour. In September this year, “Discover Bank” was TCF was truly embedded across the organisation?
ordered to refund $200 million to 3.5 million customers
for using “deceptive marketing tactics.” A quick look at the
Getting the customer trust
website, however, and you’ll find this message: “Taking care
It is thus crucial that firms should be reviewing all internal
of customers is at the heart of everything we do.”
operational processes and supporting documents –product
management, sales, marketing, and servicing, to ensure they
TCF is not just another project
reflect the principles of TCF.
It is well established and accepted that the CEO of an
I’ll leave you with a couple of thoughts…
organisation sets the culture and tone of their business,
The ultimate test is what your customers think.
as well as the strategic direction and associated priorities.
Customer “trust” that is a key driver for advocacy, not
If we were to accept that the principles of TCF required
just customer satisfaction.
a cultural shift, then it follows that in order to achieve such
a change, the CEO would need to play a key role. This was Mr Stephen Rosling is the Co-Founder and Director of TCF Matters, a
undoubtedly the case during the implementation phase of firm specialising in the audit and implementation of consumer protection
the TCF changes - processes, training, MI, complaints etc. regulations. www.tcf-matters.com.
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