THE RESPOND 2015 USER GROUP Financial Services

TODAY’S AGENDA The Here and Now, Stuart O’Sullivan (Huntswood) What’s on the Agenda in 2015, Stephen Humphreys (Huntswood) Respond: The Road-Map and Future, Duane George and Eric Brown Thematic Review – Getting Ready for Change (group discussion) Respond User Group - Your Discussion Session Respond Features and Functions, Eric Brown Thematic Review – Getting Ready for Change, Initial Results Post User Group Debrief and Refreshments

Complaint Handling – THE HERE AND NOW APTEAN USER GROUP Presentation by Stuart O’Sullivan Thursday 5th March 2015

Design and implementation Our propositions Advisory Services Development centres Complaint effectiveness Training experts Leadership skills TCF Design and implementation Senior Manager’s Regime Compliance monitoring Investment / mortgage suitability Financial promotions Delivery specialists Complaint handling Past business review Customer remediation Quality assurance Operational support Managed Client d Business Improvement Operational Risk Compliance Learning & Development Recruitment Paraplanning New business checking Sales and service Culture Training and competence RDR/MMR Root cause analysis Skilled persons

AGENDA Summary of the complaint handling Thematic Review TR 14 / 18 Improving complaints handling Consultation Paper CP 14 / 30 Practical implications of CP 14 / 30

1. SUMMARY OF THE COMPLAINT HANDLING THEMATIC REVIEW TR 14 / 18

The regulator’s view “Firms have taken steps to improve their complaint handling – both as a result of previous regulatory work and as a result of firms’ own initiative… However, it is clear that firms could – and should – do more to deliver fair complaint handling and consistent outcomes for all consumers.” TR 14/18

TR 14 / 18: The FCA’s Approach This is the first thematic review where the FCA has actively collaborated with target firms. AIM: to discover where common issues and barriers may exist that prevent effective complaint handling across the group, but also within individual firms. Methodology: (i) review operating model(s) and management information (ii) self assessment tasks including QA (iii) analysis of results (firm and collective level) (iv) working group created: discuss barriers, ideas for industry improvement 15 major retail firms who handle 90% of all complaints, across all retail sectors took part as well as 5 trade bodies Activity structured around five key stages of firms’ complaint handling: 1. identifying a complaint 2. recording a complaint 3. internal reporting of a complaint 4. provision of redress 5. carrying out root cause analysis

TR 14 / 18: WORKING GROUP RECOMMENDATIONS Dedicated complaint telephone lines should not use numbers that charge consumers more than a basic rate (including mobile users) Reconsider the definition of a complaint (e.g. removing the more subjective element of ‘material’ distress or ‘material’ inconvenience) Extend the time frame of the ‘next business day’ rule (e.g. extend to one week) Remove the ‘non-reportable’ complaints element of the next business day rule so that firms would report all complaints received Review the biannual complaints return to include more consumer centric measures Revise the FCA complaints publication (e.g. including more consumer centric measures and contextualised data)

TR 14 / 18: ACTIONS FOR ALL FIRMS The FCA stated in TR 14 / 18 that all firms may like to focus on: Whether complaint handling policies and processes fully consider whether the interests of consumers are at their heart; avoid a tick-box approach to comply with the DISP rules Reviewing internal definition of ‘complaint’ and training staff where the definition is not properly understood Whether systems and processes could inhibit accurate recording of complaints, and further consider how this impacts ability to conduct root cause analysis (RCA) The observations made about consistency of redress and distress and inconvenience payments Considering their approach to RCA – focusing on the observations made in the thematic review paper Whether they can make any improvements to their MI (messaging, interpretation, quality metrics and use of targets

2. IMPROVING COMPLAINTS HANDLING – CONSULTATION PAPER CP 14 / 30

The regulator’s view “Consumers are entitled to complain and to seek compensation from firms when things go wrong. We want to ensure that the process of complaining is straightforward, transparent and fair to consumers, while allowing firms to handle complaints as effectively as possible.” CP 14/30

Improving complaints handling (Cp 14/30) Summary of the proposals within CP 14 / 30: Extend the time period for dealing with a complaint Require firms to send a written communication Ensure firms report and publish all complaints Make general improvements to the ‘complaints return’ Limits to the cost of calls to financial services firms Implementing the Alternative Dispute Resolution Directive The following slides explore 1-3 further

Extend the time period for dealing with a complaint The basic proposal here is to move the current next business day timeframes to the end of three business days This should bring more customers into the informal process and should allow firms to deal with complaints more quickly and efficiently The thematic identified a number of problems with trying to force customers quickly through the non reportable route NBD cut off is currently an 'artificial escalator’ for complaints that could have been dealt with relatively quickly Sometimes difficult for firms to contact customers to confirm they are content with the resolution

Require firms to send a written communication This communication would be sent to all customers whose complaint is handled by the end of the proposed three business day period Provides customer with referral rights to FOS if not content Customers would be able to refer their complaint immediately after the firms response was received, rather than having to wait for 8 weeks to elapse Will provide important clarity and awareness about their right to refer complaints to the FOS Thematic review found that customers were not always informed or clear about this escalation route

ENSURE FIRMS report and publish all complaints Remove the distinction between reportable and non-reportable complaints Will increase transparency around complaints handling – and provide greater comparison Becomes increasingly important if more complaints are handled within the three business day period Some serious issues do not surface through the reportable complaints just because they can be dealt with currently by NBD Reporting changes anticipated by March 2016

Working party recommendations vs cp proposals Dedicated complaint telephone lines should not use numbers that charge consumers more than a ‘basic rate’ (including mobile users) Taken forward in the new rules limiting the cost of calls to financial services firms Reconsider the definition of a complaint (e.g. removing the more subjective element of ‘material’ distress or ‘material’ inconvenience Not taken forward Extend the time frame of the ‘next business day’ rule (e.g. extend to one week) Taken forward in proposal to extend the time period for dealing with a complaint by three business days Remove the ‘non-reportable’ complaints element of the next business day rule so that firms would report all complaints received Taken forward in proposal for firms to report and publish all complaints Review the biannual complaints return to include more consumer centric measures Taken forward in proposal to make general improvements to the ‘complaints return’ Revise the FCA complaints publication (e.g. including more consumer centric measures and contextualised data)

3. PRACTICAL IMPLICATIONS OF CP 14 / 30

PRACTICAL IMPLICATIONS OF CP 14 / 30 The deadline for responding to the CP is 13 March 2015. FCA do take on board feedback and adapt if appropriate Firms feeling strongly about any of the proposals should respond The CP mentions that the reporting requirements are due to be implemented in March 2016. This is therefore likely to be the implementation timetable for other proposals as they are all interrelated. Do firms feel this is a realistic time frame? Given the March 2016 implementation timeline, the Policy Statement is likely to be published following a relatively quick reflection period from CP responses

PRACTICAL IMPLICATIONS OF CP 14 / 30 Policy intent of the CP proposals appears sound – however, the devil is always in the implementation! The CP does not propose any change to the definition of a complaint: specifically, “financial loss, material distress and material inconvenience” are to remain. The proposal appears to be aimed at firms with high volumes of complaints – does this work well for firms with lower volumes? The key change, i.e. lengthening NBD and requiring formal communication (and FOS rights) would seem to prompt a review of a firm’s target operating model where it seeks to accelerate ‘simple’ complaints

PRACTICAL IMPLICATIONS OF CP 14 / 30 Some questions: Do firms have the right type of staff in the frontline to handle more complaints? Are firms confident that front line staff could perform additional responsibilities / handle more complaints? Will closing complaints with a ‘summary resolution letter’ encourage more customers to escalate their complaint to the FOS? Will raising awareness about the Ombudsman Service drive up FOS referral rates? Will firms records for complaints closed with a ‘summary resolution letter’ be able to support the decision made – i.e. do they currently capture enough info for NBD cases?

PRACTICAL IMPLICATIONS OF CP 14 / 30 Some questions: The FCA is cost benefit analysis states that the cost of training for staff to implement the proposed changes is cost neutral – do firms think this will be the case? Will the changes in reporting requirements require changes to how data is captured by complaint handlers, i.e. changes in complaint categories, changes in IT? Do firms currently capture NBD complaints in the same way / system as reportables? What will the capture of all complaints mean for RCA going forward? How will the increased reporting requirements impact existing operational reporting, MI packs and IT systems? Will this require greater resource? What will the impact be on governance oversight?

QUESTIONS Presentation by Stuart O’Sullivan Thursday 5th March 2015

Thank you Presentation by Stuart O’Sullivan Thursday 5th March 2015

Complaint Handling What’s on the agenda in 2015? Presentation by Stephen Humphreys 5 March 2015

THE 2015 COMPLAINTS OUTLOOK AGENDA Discussion on the future direction and considerations for complaint handling in 2015. THE 2015 COMPLAINTS OUTLOOK

Agenda Governance, Management Information MI and ensuring effective oversight - Senior Managers Regime (SMR) & Complaints Complaints, quality assurance and outcomes testing – how to demonstrate you’re delivering fair complaint outcomes Vulnerable customers and complaints

1. Governance, MI and ensuring effective oversight SMR & Complaints

Senior managers regime

Scope and reach FCA Required Functions: - Customer service Current Scope of APER/SUP10A Proposed Scope of SMR FCA Required Functions: - Customer service - Customer complaints handling PRA Approved Persons Executive Board (Plus wider Exco in large firms) Chairman Relevant committee chair SMF Heads of key business area Individuals in Group Companies Control or conduct focused functions Significant Harm Functions / Material Risk takers (CRR) Customer-facing roles that are subject to qualification requirements Any other SIF roles under the current Approved Persons Regime Individuals who supervise or manage another Certified Person Conduct Rules CR FCA Approved Persons All other employees other than those ancillary staff who perform a role that is not specific to the financial services business of the firm.

Governance, Culture and controls Accountability Structure Roles and responsibilities Oversight forums, e.g. Treating Customers Fairly (TCF), product design MI & Business Reporting GOVERNANCE ‘Tone at the top’ Learning and Development (inc. Training) Corporate vision and values CULTURE Incentives Communications Business file checking Data capture e.g. MI & Key performance Indicators CONTROLS Training & Competency (T&C) Mystery shopping Customer outcomes testing Product governance

Complaints MI “Don’t focus on what you can count… ...focus on what counts”

What is “good” complaints MI? % of customers expressing dissatisfaction / FCA reporting Position against appetite % of complainants receiving fair outcomes / Financial Ombudsman Service (FOS) overturn rates Oversight and challenge Escalation Focused management action Unit time / double touch / FOS referrals / transaction failure rates Operational effectiveness Focus on productivity and quality Operational management

What is “good” complaints MI?

2. Complaints, quality assurance and outcomes testing How to demonstrate you’re delivering fair complaint outcomes

The aim of Quality Assurance (QA) Identifies “unfair outcomes” Demonstrate consistent outcomes Assurance regarding the training & competence model Key feed of MI into senior management

Making QA Outcomes focused Firms should undertake risk-based outcomes testing to assess the quality of customer outcomes at each stage of the ‘customer journey’ WHY? Provide assurance that complaints are handled fairly and consistently, delivering fair outcomes for customers – truly assess the ‘quality of complaint handling’ HOW? risk weighted QA activity should consider: Was the outcome fair for the customer? Unfair outcomes – what retrospective / remedial action must you take? Any conduct breaches (SMR firms) Consider the underlying root cause and take corrective action

An example end-to-end customer journey Identification Investigation Decision Communication For each stage of the customer journey, we have a defined a ‘generic’ set of customer outcomes. These outcomes represent the key stages of a typical complaints lifecycle They are aligned to the firm’s conduct risk strategy The purpose of outcomes testing is to determine whether the firm has achieved a fair customer outcome at each stage of the customer journey 38

3. Vulnerable customers and complaints

Martin wheatley – FCA Chief Executive consumer vulnerability has become a key test of conscience for the City Martin wheatley – FCA Chief Executive

Martin wheatley – FCA Chief Executive Many firms will, for example, have highly specialised teams to deal with issues related to consumer vulnerability. Yet if frontline staff do not have the expertise, or confidence, to handle those cases effectively, the consumer experience is still likely to be a frustrating one Martin wheatley – FCA Chief Executive

The scale of vulnerability in the UK Extracts from FCA Occasional paper 8

Occasional Paper 8 – Impact on complaints Vulnerability is not an in or an out – it’s a scale Vulnerable customers are, by definition, less likely to complain Frontline staff, who represent the point of access for customer, is where investment is required Objection handling at point of complaint – vulnerable customers are much more likely to be closed down or experience objection handling Vulnerable customers are more likely to make poor choices (both at point of sale and complaint) When engaging with vulnerable customers, don’t just think of regulation, what about the law?

Occasional Paper 8 – Impact on complaints Information asymmetry – increased for vulnerable customers historical approach disclosure (not sufficient for vulnerable customers) tick box / signature – side steps issue FCA now opening the debate about how behavioural economics applies to vulnerable customers Some personal examples: car Finance - fees complaint major Bank - package bank account complaint life insurer – critical illness waiver of premium complaint general banking complaint – customer perception “blacklisting”

Questions for firms to consider Do we want to identify where customers have specific needs that aren’t addressed through our standard process? How do you consider and apply the differences between vulnerable and particularly vulnerable customers? Do your customers have a specific need, or are they generally at risk of vulnerability? What adjustments are reasonable to make for vulnerable customers? How empowered are complaint handlers? How do you take ‘emotion’ out of the decision, but still be empathetic and deliver fair customer outcomes? How are your telephone based staff trained to understand the points that customers are making? How do you give space for the customer to reflect? Do your front line staff currently view vulnerable customers as opportunities for next business day complaints?

Questions Presentation by Stephen Humphreys 5 March 2015

Thank you Presentation by Stephen Humphreys 5 March 2015

Respond’S ROADMAP & THE FUTURE Please contact your Account Manager if you would like to discuss Road-Map content. These slides cannot be included in a public release.

Director, Respond Product Line Questions Duane George Director, Respond Product Line Duane.George@aptean.com Contact me with any questions about this presentation and the future of Respond

Respond demonstration Please contact your Account Manager of you like to see a demonstration of Respond features. This can be offered virtually if you prefer, or on site.

NEXT: THE FCA Thematic REVIEW Defining a complaint Recording ALL complaints and the 3 day rule Reporting changes (internally and to the FCA) Written responses (new 3 day rule) March 2016 … Change Management, are the people around you ready too?

COMPLAINTS HANDING THEMATIC REVIEW & CONSULTATION PAPER 12:00-12:45

ROUND TABLE DISCUSSIONS Each table has an Aptean Facilitator to lead and take notes There are 5 key topics (following this slide) For each topic you have 5 minutes to share your thoughts Then 2 minutes to establish the points There will be a chime between slides as they auto-progress forward After the 5 topics there will be closed questions for polling At the end of today’s sessions we will present the initial results Aptean will author a more in depth set of results post-event CHATHAM HOUSE RULE APPLIES

1/5 – GROUP DISCUSSION (INTRO) DEFINING A COMPLAINT “Any expression of dissatisfaction” is not the FCA’s definition. The FCA turned down a request to change the definition to this. FCA: “The complaint must allege that the complainant has suffered (or may suffer) financial loss, material distress or material inconvenience.”

1/5 – GROUP DISCUSSION (5 MINS) DEFINING A COMPLAINT “Any expression of dissatisfaction” is not the FCA’s definition. The FCA turned down a request to change the definition to this. FCA: “The complaint must allege that the complainant has suffered (or may suffer) financial loss, material distress or material inconvenience.”

1/5 – WRAP UP (2 MINS) DEFINING A COMPLAINT

2/5 – GROUP DISCUSSION (INTRO) RECORDING ALL COMPLAINTS AND THE 3 DAY RULE The FCA proposes giving firms 72 hours instead of 24 hours to handle a complaint informally … but as a result every complaint becomes reportable.

2/5 – GROUP DISCUSSION (5 MINS) RECORDING ALL COMPLAINTS AND THE 3 DAY RULE The FCA proposes giving firms 72 hours instead of 24 hours to handle a complaint informally … but as a result every complaint becomes reportable.

RECORDING ALL COMPLAINTS 2/5 – WRAP UP (2 MINS) RECORDING ALL COMPLAINTS AND THE 3 DAY RULE

3/5 – GROUP DISCUSSION (INTRO) REPORTING CHANGES INTERNALLY AND TO THE FCA The FCA plans to benchmark sales vs complaints and to publish 3 day complaints data too. Internally what also needs to be done differently to fully consider these 3 day complaints?

3/5 – GROUP DISCUSSION (5 MINS) REPORTING CHANGES INTERNALLY AND TO THE FCA The FCA plans to benchmark sales vs complaints and to publish 3 day complaints data too. Internally what also needs to be done differently to fully consider these 3 day complaints?

REPORTING CHANGES INTERNALLY AND TO THE FCA 3/5 – WRAP UP (2 MINS) REPORTING CHANGES INTERNALLY AND TO THE FCA

4/5 – GROUP DISCUSSION (INTRO) WRITTEN RESPONSES UNDER THE 3 DAY RULE Letter – Email – Text 3 day complaints will require a reply using stock text from the FCA (via any of the above) giving brief case outcomes, an acknowledgement and FOS referral rights.

4/5 – GROUP DISCUSSION (5 MINS) WRITTEN RESPONSES UNDER THE 3 DAY RULE Letter – Email – Text 3 day complaints will require a reply using stock text from the FCA (via any of the above) giving brief case outcomes, an acknowledgement and FOS referral rights.

WRITTEN RESPONSES UNDER THE 3 DAY RULE 4/5 – WRAP UP (2 MINS) WRITTEN RESPONSES UNDER THE 3 DAY RULE

5/5 – GROUP DISCUSSION (INTRO) MARCH 2016 … 1 YEAR FROM NOW Change Management Plan – Are you gearing up for this? Do you have headcount in the right places? Can the frontline handle 3 day rules (including written replies)? Is Corporate ready for a 2-3x increase in published complaints data? Have you replied to the FCA’s Consultation Paper?

5/5 – GROUP DISCUSSION (INTRO) March 2015 Today March 2016 Go-Live

5/5 – GROUP DISCUSSION (INTRO) March 2015 Procurement System Changes Culture Change Training March 2016

5/5 – GROUP DISCUSSION (5 MINS) MARCH 2016 … 1 YEAR FROM NOW Change Management Plan – Are you gearing up for this? Do you have headcount in the right places? Can the frontline handle 3 day rules (including written replies)? Is Corporate ready for a 2-3x increase in published complaints data? Have you replied to the FCA’s Consultation Paper?

5/5 – WRAP UP (2 MINS) MARCH 2016 … 1 YEAR FROM NOW

RESPOND USER GROUP SESSION 13:45-15:15

Respond CASE AND ADVANCED AGENT Eric Brown, Solutions Consultant

Impact of 3 day informal process AHT? 1 & Done Coach? Escalation

Summary Communication For First Point of Contact Capture process Simulated Lookup Creating the communication Resolving an escalation Email output

Summary communication Advanced Case Agent Configurable capabilities Supports varied working practices Reduces operational expenditure

Contact me with any questions about Respond’s features and functions Eric Brown Solutions Consultant Eric.Brown@aptean.com Contact me with any questions about Respond’s features and functions

RESULTS FROM GROUP WORK 15:45

Over report vs risk of under reporting DEFINING A COMPLAINT Over report vs risk of under reporting Consistency of Capture and management of complaint Training of Front Line Staff and others

RECORDING ALL COMPLAINTS AND THE 3 DAY RULE “Just Like Starting Again” Clarification from FOS re ability to review summary resolution Need to capture more information at Front line – poorer customer service?

REPORTING CHANGES INTERNALLY AND TO THE FCA Getting Stakeholder buy in Case numbers increasing – perhaps over 500 cases Publication of cases – not all companies are the same

WRITTEN RESPONSES UNDER THE 3 DAY RULE Will use channel of customer complaint to reply Cost burden of responding via letter Clarification on level of personalisation required

Cost burden – double staff levels to manage Are FOS ready? MARCH 2016 … 1 YEAR FROM NOW NOT STARTED YET! Cost burden – double staff levels to manage Are FOS ready?