Client Success Story
Review, redesign and acceleration of a Treating Customers Fairly Programme
Background
Our client is a leading FTSE 100 global financial services company.
The Challenge
Our client initiated a group-wide TCF programme in mid-2006. Following a routine FSA visit, and the proposed timing of a further future visit, our client asked us for an independent assessment of the current state of their programme in early 2007.
This was planned to give a clear understanding of the position against senior management expectations and ensure activity was in line with the Regulator’s requirement to “have reached at least the implementing phase in a substantial part of their business by the end of March 2007.” (1)
The client also sought to understand how to develop competitive advantage through a sustainable market leading position in terms of TCF; delivering products and services that meet customer needs whilst protecting important revenue streams.
The Solution
Working directly for the board, Huntswood used its Insight Assessment methodology to develop a risk-based approach to assess the highest areas of risk across the business with respect to TCF over a six week period covering:
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Review and challenge of the corporate culture in respect of TCF
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Identification and validation of the key products where the risk of treating customers unfairly is highest to focus our work
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Testing TCF delivery to date by reviewing key process and control documents
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Observation of key customer interaction processes and staff behaviours across a variety of distribution channels
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Focus on Marketing and Promotion, Sales and Advice, After Sales Service, Culture and Rewards and Complaint Handling
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In order to develop a holistic assessment that not only looked at customer outcomes, but also analysed the level of embedded TCF in the client’s culture, we took an innovative approach to look at the bank from three different dimensions:
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An internal view of processes, procedures and the status of the TCF programme
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A customer-facing view from a staff perspective to understand their view of TCF
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A view from the customers perspective, which included a comparison of how the client was performing against its competitors through external market intelligence comprising of mystery shopping and consumer focus groups covering multiple distribution channels across the market
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The Result
Our findings and recommendations have had a strategic and positive impact on our client. Our assessment of the existing TCF programme found it was inconsistent and ineffective in terms of senior management support, understanding and implementing the change required to meet TCF. Continuation of the current approach might well have led to enforcement
To address this we developed a vision and high-level plan to accelerate TCF activities and to deliver a pragmatic level of implementation by the end of March 2007 and embedded TCF for the end of 2007
We also identified areas of existing best practise, which could be rolled out to form quick wins, a high-level business case and areas of current weakness that became the priorities for the design and implementation phases of the TCF programme going forwards
In particular the lack of a consistent, robust definition and communication of what TCF meant for the business had led to a lack of ownership of TCF. In order to ensure the business fully embraced the changes required to bring the client to the fore of TCF best practice in a short timescale; Huntswood recommended that it was essential that TCF be positioned as a commercial enabler to create real value to the business
Huntswood identified two streams of business opportunity for the client from the TCF programme. Firstly, focusing on improving the quality of the service delivery provided to customers would result in an increase in retention that offered a potential saving of tens of millions of pounds. Secondly, they could use the re-engineering of the sales processes across branch and call centres as a primary driver to deliver a 20% efficiency improvement by the end of 2007
The results of the market assessment enabled the client to develop a TCF vision and programme that reinforced their existing drive for customer advocacy supporting the continued positioning of the client as a market leader
Huntswood were retained to support the design and implementation phases of the TCF programme with specific responsibility for Project Management, Remuneration, Sales and Service Workstreams
Huntswood’s View
TCF is having a seismic effect on the financial services industry. Despite its importance the scale of the effort required has been misunderstood and underestimated by many firms, advisors and commentators.
Consumers now expect the sales and performance of financial products and services to match those offered by other retailers, even though they are less tangible and may be far more complicated. Yet the performance levels in our industry fall some way short of those delivered by best-in-class retailers like Waitrose, Amazon and so forth.
This has been brought into sharp focus recently with FSA activity and high-profile media investigation and coverage around Payment Protection Insurance (PPI) and banking charges in particular.
The FSA expects all firms to have implemented TCF in a substantial part of their business by the end of March 2007. Our evidence currently suggests that this deadline has been missed by many firms, increasing the risk of failing to demonstrate fully embedded TCF by the end of 2007.
We anticipate the incremental cost of this delay will be considerable to the industry. Just taking PPI sales, estimated to be worth £5.5bn per annum(2), the potential (annual) compensation bill could be in the order of £2bn, with additional administration costs to be paid for. This compares with the impact of the Pensions Review, which cost the industry £11.5bn, which had additional administration costs of £2bn.
TCF has been further complicated by the approach required to make TCF work, the need for measurable, delivered consumer outcomes and the principle-based nature of the regulation. This makes TCF radically different from previous regulation and presents a cultural challenge for many firms used to applying a rules-based, box-ticking approach.
A large number of firms have tried to deliver TCF through a tactical, traditional approach. They have concentrated on addressing regulator-informed concerns in a mechanistic way within their organisation. Consequently, their boards now have a misplaced confidence that they already treat their customers fairly. The first real challenge to this assertion will come when the FSA pays them a TCF-specific review visit.
In contrast, some firms have identified the need for cultural change across their businesses, spotting the opportunities that come from implementing TCF more holistically. These companies will not only meet the FSA’s requirements, but will be well-placed to protect existing profits, increase customer retention and capitalise on the customer service and performance improvements TCF-led change can bring.
(1) “Treating customers fairly – Towards fair outcomes for consumers” Speech by Sarah Wilson, Director responsible for TCF, FSA. BBA Conference, 19 July 2006.
(2) Mintel UK Creditor Insurance November 2005.
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