Starting with the premise that no financial services firm is perfect but all are striving for perfection, effective complaint handling is something that all should have as a central pillar for their business model.
The importance of complaint handling is highlighted when considering the principles set out by the FSA in relation to how complaints should be handled. The regulator is looking for firms to deal with customer complaints promptly and efficiently. It has set out a clear timeframe in which this must be done and has described various steps that firms should follow in reaching satisfactory resolution.
These steps are detailed in full on the FSA website and firms which are not aware of their obligations should view these as soon as possible.
One of the bugbears for customers and the regulator is the refusal of many firms to pay as much attention to after-sales service as pre-sales operations. Product design, slick administration, marketing, advertising and pointof-sale activities receive the highest priority and yet, once the product is sold, the focus on the customer is lost.
The operational slickness which some customers may have enjoyed in buying the product may be replaced with a treacle-like stickiness when they come to make a complaint. They may be passed from one department to another with no one seeming capable of taking responsibility. This puts further cracks on the public face of the financial services industry and inflates the costs associated with handling complaints as they take longer to resolve.
Regrettably, many firms appear fearful of the up-front costs associated with training their staff adequately, putting set procedures in place and ensuring things are handled smoothly and efficiently.
Many firms feel they do not receive enough complaints to justify such expense, failing to realise that a disgruntled customer can soon be turned into a happy one and even someone who recommends company products and services to their friends if their complaint is handled appropriately.
Clearly, not all firms are guilty of this. Many have worked hard to install the technology and processes that are required and have ensured their staff are fully trained and qualified. But many continue to lag far behind the standards that should be the norm.
Fortunately, due to a general willingness by the industry to do more, momentum is beginning to build behind the FSA’s treating customers fairly principles. Firms are starting to make the cultural shift that dictates it is not only product design and pointof-sales procedures that are important but also the entire process of customer contact.
Product design has had a relatively high profile recently, with the FSA calling for providers to improve their efforts in this area. Responsibility for product design may lie with providers but TCF also demands that advisers have checks to ensure that they are catering correctly for customers and it is primarily the smaller firms which seem to be failing in this regard.
Anecdotal evidence from across the intermediary sector suggests that while firms may be aware of their obligations, they have done little in practical terms to manage them and this is where problems will occur.
Pension and endowment complaints have been the main areas of customer complaints in recent years and there is perhaps a feeling that the worst is behind us. This may be true for these particular product areas but it is unrealistic to believe that other problems are not lurking over the horizon.
This is the case in the protection market. The FSA has said that some companies selling payment protection insurance “are still failing to treat their customers fairly. Many are not giving customers clear information during the sales conversation and are failing to make clear that this cover is optional.”
A significant chunk of the seven million PPI policies sold each year are thought to have been missold, which means that firms must not only examine the design and sales processes in place but also ensure they are equipped to deal with complaints when they inevitably materialise.
In the first instance, firms need to look at the FSA’s rules regarding complaint handling and establish exactly what is required of them. They should then be looking at the processes they have and evaluate how they match up. Thereafter, it is a case of bridging the divide and setting up robust procedures that will not only help deal with complaints and also ensure firms comply with regulations.
A good complainthandling procedure will help firms weed out unfounded complaints and deal with genuine problems more efficiently. Doing so will undoubtedly provide the opportunity to win over dissatisfied customers.
Staff training is key to any such move and the IFS School of Finance is this month launching a certificate in complaint handling to help companies.
The FSA does not expect firms to be perfect but will have serious complaints about those that make little effort to move in that direction. Gaining appropriate training in this area is one way that commitment can be demonstrated.
Firms should undertake this not just because it helps meet regulatory requirements but because it adds value to the firm by ensuring customers are always treated fairly.