Treating Customers Fairly - the challenge for financial services marketers
Tony Katz, Financial Promotions Team, FSA
How consumers feel about financial providers
79%76%
63%60% 59% 57%
46%
They don’treward loyalty
Source: BMRB Online - regular newspaper readers who have acquired or renewed home or motor insurance within the last 6 months or acquired or renewed a mortgage, loan or credit card within the last 12 months, 3753
The language they use is difficult to understand
You have to change your
provider regularly or
you end up with a
poorer deal
They’re not interested
in helping youunderstand what’s best
for your needs
It’s hard to know if
you’re gettinga good deal
They make it so complicated youend up confused
You can trustthem
Principles-based regulation
• A fantastic opportunity to innovate!
• Greater responsibility for firms and senior management
TCF outcomes1: Consumers can be confident that they are dealing with firms where
the fair treatment of customers is central to the 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 point of sale.
4: Where consumers receive advice, the advice is 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 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 make a complaint.
“Management must think of itself not as producing products, but as providing customer-creating value satisfactions. It must push this idea..into every nook and cranny of the organisation. It has to do this continuously and with the kind of flair that excites and stimulates the people in it”
Ted Levitt
End of tick-box compliance
No more silos
COBS: high-level requirements for financial promotions
Communications must be accurate and sufficient for their purpose
They must be presented in a way that is likely to be understood by the average member of the group to whom they are directed
Where benefits are discussed, there must be a fair and prominent indication of any relevant risks
Firms must not disguise, diminish or obscure important items, statements or warnings
Key FeaturesIssues to consider in designing KFDs• Type size• Attractiveness of the text• Clarity of the key messages about
cancelling• Relevance• Repetition• Amount of process detail (which is
better explained elsewhere)• Style:– use active verbs and positive
language;– stick to precise and short sentences;– avoid the use of abstractions and
redundant phrases; and– avoid legal terms and bureaucratic
language.
"Save £150“/"You could save £150“/"Save up to £150"
Savings claims
Good practice:
price/savings claim representative of likely customer benefit
clear basis on which such saving is to be achieved
Poor practice: unclear or hidden
explanation of savings claim
misleading claim,
false customer expectations
1954 car advert from State Farm Mutual
Internet promotions
Good practice• Risk information appears
prominently on the first page of the website the customer arrives at and near to the product description.
• Devices such as fixed risk warnings remain on the screen even when the customer scrolls up and down.
• The customer is encouraged to think about whether the product is right for them.
• The risks are repeated further into the application process.
Poor practice• The risk information can
be easily overlooked which could also result in the consumer being taken straight to an application form (e.g. by clicking on to a banner advertisement or accepting a cookie).
• Key information, such as on fees or exclusions are buried within the website or placed in a separate section such as FAQs.
Commercial property funds
Last word
• Fewer rules do not mean lower standards
• Stand-alone compliance
• Culture is the key to it all