Complaints – will we ever link dissatisfaction to treating customers fairly?

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The six-monthly release of Financial Ombudsman Service [‘FOS’] complaints data to the end of June 2017 have just been issued.  Any business that prides itself on how it deals with customers who complain will be disappointed to see that the Financial Conduct Authority [‘FCA’] messages on treating customers fairly [‘TCF’] are not reaching those that matter. Maybe, the messages are reaching the compliance departments, but the power bases in those businesses are not significant enough to change business behaviours. Of course, there are many firms who are performing well, but the outliers dominate the headlines and get the rest of the financial service industry a bad name.

What do I mean?  There were five major businesses where, in respect of Payment Protection Insurance [‘PPI’], FOS found in favour of the customer in more than 75% of the cases referred to it (three firms where findings were above 90%).  In the banking and credit category, eight firms were found against in more than 60% of their cases. Where firms did perform well were in the mortgages and home finance section and life and pensions section -probably because those areas are dominated by building societies and independent financial advisers rather than PLC businesses

The million-dollar rhetorical question is what percentage of decisions in favour of the customer indicate that the firm is not considering complaints effectively

Let’s go back to basics, the services of FOS are engaged only when a firm and customer cannot resolve their differences between themselves and then call on the services of FOS to help resolve the dispute.  It’s natural, therefore, that sometimes FOS will agree with the customer and sometimes the business.  Firms should not be criticised simply because cases are referred to FOS or that FOS find in favour of the customer in a percentage of cases.  The million-dollar rhetorical question is what percentage of decisions in favour of the customer indicate that the firm is not considering complaints effectively.  Although I do not really expect an industry wide answer to that question I would expect the compliance teams and boards of financial businesses to have an answer for their business and to have the wherewithal to carry out a root cause analysis when a certain percentage is breached.  This analysis, of course, should go beyond the learning analysis that should take place on every occasion when a decision in favour of the customer is found.

If the regulatory TCF message has not persuaded firms to look at complaints in a more customer focused way, what might make change happen? Maybe, firms need to focus on the positive financial performance of a business that gets its complaint handling right rather than the cost of processing unhappy customers.  You don’t need to search far to find significant amounts of research in this area to convince the most sceptical bean counter.  Just think about it; businesses will only hear from less than 5% of its dissatisfied customers – that will leave a high percentage of customers who don’t tell the business that they are unhappy, but those customers are more than happy to tell their friends how poor the business is.  Social media makes this outpouring of discontent easier than ever!  More than 90% of unhappy customers will not do business with a firm again, whereas if a dispute is satisfactorily resolved there is a greater than 70% chance that the customer will do business with the firm again. On top of that, depending on what business you are in, it could cost five times more to get a new customer than it does to keep an existing customer.  The financial impact of a business of getting complaint handling right, or wrong, is not rocket science.

So what conclusion can we draw from the FOS six-monthly update?  Some firms are improving, but others need to re-think how they deal with customers who complain. The data should be a wakeup call to many in the financial service industry. Firms need to take a wider more in-depth view when undertaking root cause analysis.

 

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Partner - Baxters Business Consultants - a business consultancy undertaking marketing, training, freelance journalism and expert witness services to the residential mortgage lending, building society and financial service industry (April 1993 to date) - www.baxtersbc.co.uk.

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