For too long, we’ve had speed-bump financial services with products launched, sold heavily by highly incentivised, ill-trained staff, then the brakes put-on with mis-selling reclaiming campaigns. That’s bad for both consumers and the industry.
The regulator, the Financial Services Authority (FSA), yesterday launched its report into how banks and other financial services staff are incentivised to flog products. I was invited to share the platform with FSA boss Martin Wheatley, to respond from a consumer perspective (see Martin Wheatley’s guest comment on bank staff incentives encourage misselling)
While I don’t believe we need to ban all incentives, the cliffhanger way they’re structured to ramp up sales has to change.
Play ‘spot the off-script moments’â€¦
I very rarely write speeches, normally I speak off-the-cuff. Yet having had a draft of Martin Wheatley’s honed words and realising this wasn’t a time to wing it, for once I did some pre-thinking and pre-prep.
Below are my scrappy speakers’ notes for the occasion. Some have the words, some just scrappy memory cues for me. As you’ll hear if you watch the video, I only partially stuck with it, but it gives a rough idea of where I’m going.
For too long, we’ve had speed-bump financial services, with a product launched, sold heavily, then the brakes put on when someone like me launches a reclaiming campaign.
That’s bad for consumers and the industry. The bosses of the big banks and insurers need to get behind this cause at last being championed by the FSA.
They must lead by example and prove they’re not just there to make a fast buck.
If they don’t, I promise we will try to make you spend more money putting it right than getting it right.
Bank staff â€“ packaged accounts whisper.
The issue isn’t that people don’t trust, it’s that they are empirically right not to do so.
PPI, bank charges (arguable), investment mis-selling, likely packaged bank accounts mis-selling, small biz swaps, endowments, pensions â€“ and many other as yet hidden or small scale scandals.
Never mind pet insurance and business bank accounts â€“ promised for life, but cut short.
I’m not anti-commission â€“ worries about RDR hurting advice.
Structure of rewards based on cross-selling and cliff hangers has led to calculated mis-selling, a constant part of the financial services landscape.
As Martin’s detailed the problems with rewards and incentivisation culture, I want to take it on and look at how this is compounded by FIVE PILLARS of mis-selling.
No widespread compulsory financial education:
Financially illiterate population â€“ many of whom, especially older customers, come from a culture of respecting the bowler-hatted bank manager. Younger customers’ lack of personal tools to delineate right and wrong – it should be on the curriculum. (See the Financial Education Campaign.)
Staff who are poorly trained and don’t even know what they are saying is wrong.
From store cards sold by 16-year olds for vouchers, to call centre staff brought in to flog â€“ training has never been good enough. Even now, bank managers at Halifax branches flick-flack on Twitter about Halifax and Lloyds being part of one savings safety group.
Santander managers saying all money is 100% protected.
Countless times we hear reports of misinformation. Without the knowledge to double check.
No sense of responsibility to customer, only to sales â€“ in a public service institution, which banks now are, this is wrong.
1 in 4 suffer mental health problems each year.
Financial phobia is rife.
Older people suffer from the disease of trust.
An attitude of information, not explanation.
Box-ticking attitude towards treating customers fairly.
Credit card summary box.
Many financial services staff, and especially bank staff, are positioned as advisors, but should be called salespeople.
We know they’re incentivised wrongly, often on low wages, trying to make their own way. We’ve heard of humiliation charts for poor selling, with junior managers responsible both for managing, supervising and incentivising staff and worse, while not financial services.
Energy salesman told to read pornography to pump himself up for sales. Yet this attitude while softer in banks is still underlying.
Yet there are no bad products. Simplification is the only option â€“ that’s not good for consumers as rates tend to be lower, and less choice, nor is it good for industry but if this isn’t fixed it’s the only way.