That's Not Fair!

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The recession and near-collapse of the global economy have been at the forefront of people’s minds for the past year, placing a spotlight on the financial sector for all the wrong reasons. One regulatory body, the United Kingdom’s Financial Services Authority (FSA), wants to make sure that individual consumers aren’t lost in the shuffle of bailouts and loans. 

“In the U.K., we’ve had instances of selling problems in the retail market in which customers had not been treated fairly, which created tension,” explains Nausicaa Delfas, head of department, retail policy and conduct risk, for the FSA. 

The FSA, an independent nongovernmental body given statutory powers by the Financial Services and Markets Act in 2000, was created to follow through on four strategic objectives: maintain confidence in the financial system, promote public understanding, secure the appropriate degree of protection for consumers, and reduce the extent to which it is possible for a business to involve itself in financial crime.

Part of following through on these aims was the creation of the Treating Customers Fairly (TCF) initiative, established in 2005. Firms were mandated to be TCF-compliant by December 2008. According to the FSA Annual Report for 2008/09, the initiative was meant to address long-term issues so consumers can be confident of receiving fair treatment, and firms can demonstrate they’re meeting regulatory obligations. 

But can you measure “fair treatment”? That answer, like so many when it comes to metrics, is hardly cut-and-dried. (See “Mistaken Metrics,” page 30, for more on the topic.) Delfas says TCF compliance doesn’t rely on any single overarching statistic—which she believes would defeat the purpose of the entire initiative. “Financial services companies vary and it’s difficult to have one prescription for every situation,” she says. “It’s up to firms to determine for themselves how to treat customers fairly.”

In order to give companies a framework around which to shape customer-fairness initiatives, the FSA unveiled six outcomes in 2006 elucidating what firms’ regulatory obligations are to the fair treatment of customers. (The sidebar “What’s Fair Is Fair,” below, shows all six outcomes.) In addition to online case studies showing good and poor practices for each outcome, the FSA also published a cultural framework and listed its key culture drivers: leadership; strategy; decision making; controls; recruitment, training, and competence; and reward. 

Scott Charnock, customer feedback manager at U.K.-based financial services company Egg, which was acquired by Citigroup in 2007, has been embedded in the TCF process for several years. “Part of what I’ve been doing is integrating the customer story of TCF into our measurement of the overall outcomes,” he says. 

Charnock adds there were two parts to redesigning Egg’s customer surveys: Aside from addressing TCF, the effort also allowed the blending of the Egg and Citi UK surveys onto a common structure—which took approximately six months but was critical for a comprehensive view of sentiment. Looking at qualitative data, such as the open-answer portion of the assessment, was also a point of emphasis. 

“Not all questions on the survey are relevant to TCF, but ones that measure TCF within it allow us to give an actual score metric [on a zero-to-10 scale] for those questions,” he says. “We also give an opportunity for the customer[s]—in their own words—to detail problems they may be experiencing, and use that to help us investigate any issues that could become TCF ones.”

Egg’s surveys are based on a solution from Confirmit, a software-as-a-service provider of customer feedback platforms. According to Gary Schwartz, the senior vice president of marketing at Confirmit, being able to stay methodology-agnostic is important—especially in complying with TCF: The goal is simply to provide a way for companies to solicit and collect information from customers via whatever communication channels necessary. “We’ll support whatever methodology researchers come up with,” Schwartz says. “We want to be flexible so people can use us irrespective of how they decide to demonstrate compliance with TCF.”

Now that the deadline has passed for companies to be TCF-compliant, the audits have ratcheted up—according to the latest annual report, the total value of fines levied by FSA skyrocketed, from 4.5 million pounds in 2007–2008 to 27.3 million pounds in 2008–2009. FSA looks at a company’s culture according to the framework and the metrics it’s settled on to gauge fairness, but TCF goes further, aiming to ensure that the gathered information is used to actually improve the customer experience. 

“We’ll listen in on customer calls, assess the quality of advice they’re giving and promotions they’re issuing,” Delfas says. “We’re not looking solely at whether or not the firm has a good system and control, but rather, is the advice it’s giving suitable, [is] the communication fair to customers? After all these years, we now expect to see high performance.” 


SIDEBAR: What’s Fair Is Fair

  1. Consumers can be confident they’re dealing with firms where the fair treatment of customers is central to corporate culture. 
  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. 
  3. Consumers are provided with clear information and are kept appropriately informed before, during, and after the sale.
  4. When customers receive advice, it’s suitable and takes account of their circumstances. 
  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. 
  6. Consumers do not face unreasonable post-sale barriers imposed by firms to change product, switch provider, submit a claim, or file a complaint. 

Source: Financial Services Authority


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