24 October 2017 Category: Insider Perspective
Today’s customers expect products and services that meet their needs, at a fair price, from companies that have their best interests at heart. They also expect their personal data to be handled professionally, securely and privately; and used only for purposes that they have consented to.
These expectations are based on clearly defined customer rights, underpinned by a range of new regulations, and should therefore be at the heart of every company’s business model, conduct strategy and corporate culture.
At a time when regulatory bodies in several sectors are tightening the rules around how customers and their personal information should be handled – sales and marketing professionals need a clear understanding of the laws that apply to them.
They also need to communicate clearly and regularly with their prospects and customers to gain a holistic picture of their needs, circumstances and expectations, in order to act appropriately before, during and after the sale.
Let’s unpack the various regulations that are shaping the market today and explore how strategic telephone-based research services can ease your compliance burden.
Treating customers fairly: do you have the right strategy in place?
All firms regulated by the Financial Conduct Authority (FCA) are expected to align their conduct – and broader business strategies – with the FCA Sourcebook’s principle that a firm ‘must pay due regard to the interests of its customers and treat them fairly’.
The Treating Customers Fairly (TCF) programme aims to ensure that all financial services firms put their customers’ best interests at the very core of their business models. The overarching goals of TCF are to:
- Make sure that customers fully understand the features, benefits, risks and costs of the financial products they invest in
- Mitigate the risk of selling unsuitable products to customers
According to the FCA, there are “six consumer outcomes that firms should strive to achieve to ensure fair treatment of customers”.
- Consumer confidence that they’re dealing with firms that put TCF at the heart of their corporate ethos.
- Any products or services retailed meet the needs of identified and targeted consumer groups.
- Consumers are clearly and thoroughly informed before, during and after the sale.
- All advice given to customers is suitable and relevant to their circumstances.
- Consumers are only sold solutions that meet their expectations in line with what the firm has promised.
- Firms do not make it unreasonably difficult for consumers to change products or providers, submit claims or make complaints.
TCF is not about creating happy customers, but rather informed customers
Importantly, the TCF principle does not focus on creating satisfied customers, because a customer may feel satisfied with the service provided, yet be blissfully unaware that they have just invested in a completely unsuitable product or service.
Sales and marketing professionals therefore need to act responsibly – adhering to both the letter and spirit of the law – when they segment, target and communicate with prospects and customers. At every stage of the customer journey, individuals need to be informed and confident that they’re being offered something that suits their needs and circumstances.
For these reasons, TCF compliance is a continuous process, not something that firms can roll out once and then forget about. At the very heart of TCF is a need for companies to know their customers – by gaining a clear and deep understanding of their requirements, challenges, unique circumstances, and knowledge of the solutions being offered to them.
The consequences of non-compliance
TCF applies to all regulated firms that provide financial products and services, along the entire retail supply chain, including organisations that do not have direct contact with retail customers. Sole providers are also governed by this principle.
There are very real consequences for firms and individuals who don’t follow the rules. For example, in December 2015, the FCA sought to impose a ban and financial penalty on Charles Palmer, former CEO of Financial Limited and Investments Limited, over failing to “act with due skill, care and diligence” to ensure his firm’s representatives gave fair and relevant advice to clients. The matter was referred to the Upper Tribunal; and in August 2017, the Tribunal upheld the FCA’s decision: Charles Palmer has been prohibited “from performing FCA significant influence functions” and he has been fined £86,691.
This is just one example among many; and the FCA has made it clear that it will “continue to consider enforcement action” should any firm’s systems or actions leave open the potential for the mistreatment of customers.
“This is much more likely to be our response where firms continue to deny that TCF has any relevance for them or have failed to take appropriate steps to work out what changes may be required and to start implementing them,” the FCA has explained in a statement on its website.
Beyond financial services
Regulatory bodies in other sectors have also set out codes of conduct that stipulate how businesses should treat their customers. One such industry is utilities – a sector that has suffered from a poor reputation in recent years. Here, the Office of Gas and Electricity Markets (Ofgem), an independent National Regulatory Authority, aims to protect the interests of electricity and gas consumers through a range of initiatives aimed at eradicating bad practice and unfair pricing.
After completing a Competition and Markets Authority (CMA) investigation into the competitiveness of the country's major energy companies, Ofgem found that 70% of domestic customers were still paying expensive ‘default’ standard variable tariffs. This equated to customers paying £1.4 billion more than they should per annum (i.e. compared to what they would pay in a fully competitive market).
In response to these findings, Ofgem announced a package of reforms that aim to “drive down costs by increasing competition between suppliers and helping more customers switch to better deals, whilst protecting those less able to benefit from competition.”
Ofgem also recently announced that it will be implementing new, more flexible rules governing how suppliers may communicate with customers. These regulations will rely on enforceable “principles” rather than detailed rules.
“Experience shows us that detailed rules can become outdated or prone to loopholes. In contrast, overarching principles, such as ‘treating customers fairly’, can’t be easily sidestepped, making it easier for us to hold suppliers to account," an Ofgem spokesperson has explained.
As in the financial services industry, the onus is now on gas and electricity organisations to treat their markets fairly and deliver positive consumer outcomes.
The way forward
In this regulatory environment, organisations in a range of industries need to be aware of the principles that govern their sectors or face the risk of enforcement action. One of the most strategic ways to ensure that your organisation is treating customers appropriately is to speak to these prospects and customers themselves!
Ideally, you need to offer a clear channel for communication, customer feedback, comments and complaints – and telephone-based contact and research plays an immensely valuable role here.
Phone-based interactions are personal, enabling you to gain a better understanding of your customers’ needs and challenges. This helps you to segment your consumer groups so you can target and market your solutions accordingly (and ensure TCF Outcome 2).
Professional telephone research services can also help you to monitor whether your consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale (so you can deliver TCF Outcome 3).
At the same time, customer feedback can help you to identify where conduct, culture and possibly even product and service improvements are required.
Asking the right questions
The FCA has advised firms to reach out to customers and ask questions that gauge their understanding of the products and services being offered to them:
“Many firms use customer satisfaction surveys to understand the customer experience. To enable them to capture fairness firms may find it useful to refine their questions. For example, rather than simply asking a customer if they are satisfied with or understand a product or service – or in addition to doing that – firms could frame questions designed to test how far the customer understands the product or service being provided and how far it meets their expectations such as ‘What does this product do?’ or ‘Why did you buy this product?’. Treating Customers Fairly - Towards Fair Outcomes for Consumers
All of this is a lot easier to achieve in a two-way dialogue between the customer and a skilled research professional who can quickly create a personal connection with the customer to build rapport and discover valuable insights.
Phone conversations enable you to gain a lot more nuanced information than you would through an online survey, for example; and when these conversations are recorded, you have a full audit trail to support your compliance with relevant regulations and organisational policies.
And don’t forget data!
Clear and relevant communication with customers can only be achieved if your data is accurate and up-to-date. Customer interests and preferences change over time; so, once you capture insight, information needs to be maintained to keep customer interactions meaningful and appropriate. And, once again, legislation is being brought to bear to give control back to the consumer.
Any business in the UK or EU that collects or processes personal data will need to comply with the General Data Protection Regulation (GDPR), which comes into effect in May 2018. This law governs how sales and marketing organisations collect, manage and process information. A key focus area is tighter rules around consent, which must be provided – freely and explicitly – with a clear explanation of what data will be used for.
GDPR can be viewed as an excellent opportunity to improve the quality of your data to support open and relevant communications with clients. Here also, phone-based data cleansing and enhancement services can make this process much easier, more efficient and auditable.
But it’s important to choose the right partner
In this environment, businesses are fighting to win back their reputations, distance themselves from negative perceptions and remain compliant with all the relevant laws. To maintain customer loyalty and prevent the risk of misconduct by anyone within or associated with your organisation, it’s important to partner with reputable telephone-based research specialists who are regulated by FCA and other relevant bodies.
Why partner with The Telemarketing Company?
As an FCA authorised and regulated business, and Market Research Society Company Partner, TTMC Research is well placed to help financial services organisations meet their compliance obligations using a specialist team within our telephone research unit. TTMC adheres to strict codes of conduct and meets rigorous standards around data protection, handling and confidentiality. Our agents are fully trained on broader industry regulations including the FCA Code of Practice and Data Protection laws.
Common compliance projects managed by our specialist inbound and outbound calling teams include:
- TCF compliance call needs
- Post sales welcome calls
- Inbound call handling
- Outbound post sales client surveys
- Complaint handling
For example, in the retail sector, we’ve carried out FCA regulated TCF compliance calls on behalf of one of the UK’s top mobile phone providers to ascertain whether phone insurance was sold correctly, and on behalf of one of the UK’s major retailers, called customers who had raised a customer service issue to ensure cases were resolved to their satisfaction.
In the financial services sector, we have provided FCA authorised TCF compliance calls for financial product sales on behalf of a leading global insurer and sold asset protection insurance to a client’s existing customers, incorporating rigorous compliance checks to ensure calls and sales adhered to FCA selling guidelines.