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welcoming complaints as insight for improvement

Tony Boorman, deputy chief ombudsman, speaks at the annual conference on "customer experience management for banking and financial services"

London, September 2012

I'm grateful for the opportunity to address your conference.

I'm going to urge you today to embrace customer complaints. In fact, I want you to encourage them and to celebrate them for what they can be - essential insights into how you can improve your service and better meet the needs of your customers.

Self evidently it's important to plan for success. And I'm sure that success is what much of your conference has been focused on. Success through:

  • improving the customer experience of banking and financial services;
  • introducing smoother, more consumer-intuitive processes;
  • helping your staff to see serving customers as the central focus of their role;
  • providing your staff with the right tools and training to deliver; and
  • developing the services and products that better meet consumer needs.

So it's heartening to see this focus today on these things. And it's heartening, as well, to see acceptance across the financial services sector that too often in the past the incentives of this industry haven't correctly aligned.

Certainly we can all see that many of the problems from which retail financial services now suffer - including the sector's generally poor reputation with its customers - stem from misplaced incentives in the past. Incentives not to focus on serving customers with great innovative services and products - but incentives to sell products that customers didn't want, didn't understand and wouldn't have purchased if the risks and shortcomings of the product had been made clear. In other words incentives to mis-sell.

Now, I don't propose to spend your time this morning analysing the reasons for past failings. Many others have already done so from a wide range of perspectives - although it must be said without universal agreement about the causes.

But all accept that the past has too often been about failings, not success. And now, I think, most - perhaps all - accept that the primary responsibility for good practice rests with financial businesses themselves. Banks, insurers and financial firms decide themselves what to sell, how to advise and what services to provide. Not others. Certainly no one is forced to mis-sell.

But doubtless, too, regulation has a role to play in making sure that those incentives are correctly shaped to work with the grain of good service and responsible financial services, not against it. We heard earlier this week from Martin Wheatley about how he saw the new Financial Conduct Authority (FCA) developing. The ombudsman has a contribution to make to support the regulator in that work.

So how does this wider picture fit with your debate about improving the customer experience? And why am I going to urge you to focus at least some of your planning for imperfection?

First, because imperfection happens. No customer service system can deliver great service on every occasion. Errors will be made. Slip ups will occur. What works well for some customers will not be welcomed by others. And products developed in good faith will find their way into distribution channels and to customer groups for which that product is ill suited.

Hopefully your own systems and controls will identify these things. But customer complaints provide an invaluable front-line source of information about those problems. A first line of data about the parts of your service that may need review and improvement. It seems to me that getting that feedback, and learning from it, is a critical factor in the successful development of any business's customer service - but perhaps more so for banking and finance than most others.

Some of you tell me that you are aiming to reduce the number of complaints you receive. That sounds very positive. But I want to debate whether that is always the right objective. Perhaps some people should be aiming first to increase the number of complaints! What do I mean by that?

Well, customers don't complain for the fun of it. Almost all feel, often strongly, that the business has let them down - sometimes badly. But many consumers worry about complaining, asking themselves, "Will I be listened to? Will the firm look at things fairly and put things right promptly. Or will the firm 'get its own back', or put me on a black list, or simply ignore me?"

In fact, putting people off complaining is really quite easy. Encouraging them to do so is much harder.

Complaint volumes tell us little about the relative quality of service that different businesses provide. A poor quality business - with a reputation for ignoring the concerns of its customers - may receive few complaints, simply because its customers see little point in complaining to a business that is so clearly not responsive to their needs.

In contrast, a business that has a reputation for listening and that invites feedback may receive far more complaints - simply because the customers feel they will be listened to. And the extent to which a business makes the process of complaining easy or difficult will also drive big differences in volumes.

And to make matters worse, a crucial issue with financial services is the difficulty that many consumers have in identifying whether or not they have a complaint. A point I'll return to later.

This isn't to say that complaint volumes are an irrelevance. They do tell us something. Overall, the number of complaints raises questions about how a financial business (or group of businesses) is performing - or at least how its customers feel it's performing.

That's why our chief ombudsman - speaking at an ABI conference this week - drew the insurance industry's attention to the rising tide of many insurance cases. And self evidently, we cannot ignore the torrent of complaints arising because of consumer concerns about poor sales practices by banks in the case of payment protection insurance (PPI).

But the most compelling picture, the telling story your customers are providing, arises from those complaints where things have not gone well.

Sometimes it's simply that the initial explanation has been insufficient. You may have been "right" - but the way you explained it wasn't. Much of our work at the ombudsman is around better explaining to your customers why your actions have not been unfair. But it would have been a better outcome for all if your initial explanation had addressed more tellingly your customer's concerns in the first place.

In other cases, of course, the financial business has simply failed its customer. Perhaps it's slipped up. Perhaps it's acted unfairly. And that needs to be put right. Promptly, honestly and effectively.

But this isn't the end of the story. Many complaints can give valuable insights into how similar problems can be avoided in future - and how customer service can be improved.

So-called "root cause analysis" of your complaints isn't just a regulatory requirement - it's commonsense. It's about improving service and keeping ahead of your competitors. It's about better meeting your customers' needs.

Now, I know that complaints don't always clearly provide easy insights into all consumer problems. Financial services are often complex by their very nature. A disappointing outcome - say, to an insurance claim or an investment - may be a proper and necessary feature of the product that has been purchased.

And of course, not all untoward events are covered by your insurance. And investments don't protect you from all adverse market circumstances. But the issue may be that the customer got the wrong advice - or the business has taken unfair advantage of "small print".

Financial businesses know this. They know customers cannot always express their concerns in legal or regulatory terms. "Are you sure that's right?" is a request that should lead to the financial business thinking carefully about whether the outcome the customer feels to be unfair may be the result of the business's own shortcomings. So "root cause analysis" needs to get under the skin of concerns - to think calmly and dispassionately about the causes of customer dissatisfaction.

The thoughtful handling of customer complaints is a key responsibility of all financial businesses. And it's vital that businesses themselves take the lead here. Many do. I know there's increasing focus on good complaints handling in those banks and insurers that really want to treat their customers fairly.

But customer complaints aren't always treated seriously. And even where high standards are set, customers and financial businesses won't always see eye to eye.

That's where the Financial Ombudsman Service comes in. We intervene only if the customer asks us to. And only when you - the financial businesses - have already had a good opportunity to sort things out.

Our focus is to put things right pragmatically - and as far as possible with the agreement of both the business and its customer. But where necessary, we decide cases and reach conclusions - to draw a line under a set of problems. So what we try to ensure is that the business and its customer can move on together after we have been involved.

But like all ombudsman schemes, we have a responsibility that goes beyond the individual complaint. Crucially, we try to feed back what we see for the benefit of financial businesses and consumers alike.

So we continue to place emphasis on the transparency of our work. We publish on our website:

And I'm also pleased to say that the government has provided us with a clear mechanism for going further - publishing ombudsman decisions to show all interested parties what formal decisions we are making and why.

In these ways and more, the ombudsman will work together with financial businesses to improve services for customer - and to support everyone who wants to build customer confidence in financial services.

So I'd like to conclude by setting out a brief checklist for your customer experience work.

  • Do you plan to welcome and encourage customer complaints and concerns?
  • When people complain to you, what's your focus? To decide whether the complaint is "justified" - or to respond as constructively and flexibly as possible?
  • Do you have a means of learning from complaints - however uncomfortable the findings?
  • Do you look behind the specifics of the way the customer has expressed their concerns, to consider what if anything has gone wrong?
  • Do you work with the ombudsman service to put things right when cases are referred to us?

So, in short, do you embrace, encourage and celebrate complaints?

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