In Money Marketing back in March, I speculated that the FSA/FCA is now likely to focus on the retail activities of the banks. I concluded that the regulator expected the RDR to address the past problems with independent advice and that banking is where it must now focus, with a clampdown on incentive schemes which could encourage staff to missell more complex and riskier products.
And so it has transpired. The results of recent research into the financial incentives paid to customer-facing staff were described by the regulator as “disturbing” and risked misselling. Martin Wheatley, the chief executive designate of the FCA, said: “This marks the start of a programme of work to reduce these risks, which the FCA will take forward, and that will involve further supervisory work….and a possible strengthening of our rules. I am going to be personally involved in getting this right.”
Mr Wheatley went on to question what the incentives were designed to do. “Is it to get the best deal for the customer, or is it to get the best deal for the person or firm selling it? It is too often the latter,” he said. “It needs to be more balanced.”
This will be welcomed by customers but I think it’s not just about incentives but also about the role our high street financial institutions expect their staff to play. This struck me after some quite surprising experiences this summer.
I was at a branch of my high street bank getting a quote for changing pounds into euros. The counter clerk gave me the quote but added: “Don’t say I said this but the travel agents over the road often have the best deal.” I thanked her and checked. In fact the travel agents didn’t have a better deal on that day and the service there was terrible. I returned to the bank cashier and bought my euros.
I was also having trouble with my debit card and was dreading the lengthy phone call to the bank, as I was passed from pillar to post to try and sort this out. Again the counter clerk knew the right person to ring to fix it straight away and did so.
So what have these experiences done for my view of the bank? First by giving me an honest appraisal of the competition I felt that the counter clerk had my interests at heart, and second by using her knowledge of the bank she had saved me time and hassle to sort out my debit card. Is this what the banks and the regulator should be aiming to achieve?
If customers felt that bank staff could speak impartially and help them navigate the complex world that is today’s high street banking system, how powerful would that be in improving trust?
Perhaps the banks simply have to get their core offering right. Financial services are immensely complex. Don’t make front line staff sales people, give them the freedom to help customers to navigate that world and to be the customers advocate within the organisation. If I want a financial product let them refer me on to someone else in the bank, but give tellers and customer contact staff the latitude to be on my side and to be the customer’s advocate.
John Howard is a former chairman of the FSA’s Consumer Panel and a special advisor to Huntswood.