The fundamental weakness of current regulation is that it relies primarily on effective consent by consumers, effective disclosure by banks and education by regulators. In order for all three layers of regulation to work we rely on banks’ commitment to good ethical conduct with respect to service processes. Take away ethics and integrity and over emphasise aggressive sales targets and the frame in which regulators depend on to protect consumers disappears. Is it not ridiculous that the largest fine the FCAC can impose on a bank for the breaches we appear to be seeing is a $500,000 fine?
From 2006’s, “The New Science of Sales Force Productivity”:
“They can get much more out of their entire sales force by using a hard-nosed, scientific approach to sales force effectiveness.…in a few years, they will almost certainly be standard operating procedure for any company that hopes to compete effectively in the global marketplace.”
“When we studied the results of a systematic sales force effectiveness program launched in several branches of a large Korean financial services provider, we found that the branches experienced a 44% rise in weekly sales volume, compared with a 6% decline in other branches. The top quartile of customer-service reps increased their product sales by 6%, the second quartile by 59%, the third quartile by 77%, and the bottom quartile by an astonishing 149%. “
Lucie Tedesco, Annual Consumer Session, Ottawa, March 30, 2017:
Much like the organizations you represent, FCAC is focused on consumer protection. The financial marketplace is constantly evolving, and we have to stay in step with that evolution—and evolve ourselves. We are only as effective as we are prepared for emerging challenges and opportunities.
Take an industry where relationships have been built on trust, decades of trust, where these relationships have a natural point of sale advantage, where the regulator trusts the industry to treat clients fairly and whose main lever of regulation is education and mandated disclosure.
Add to this mix a highly concentrated banking sector, where most individuals already hold an account and where the route to revenue growth lies in selling successively more and more services and products each year.
And then add aggressive management of those sales targets.
Canada needs to scrap its over reliance on education and disclosure and the “tick the box exercise” that is consent and take heed of the changes to the competitive landscape and the well recorded weaknesses of an over reliance on disclosure as a regulatory tool.
Forget educating the public, the FCAC needs to educate itself as to the realities of both the industry and regulation of that industry.
Go Public’s Investigation
In March CBC’s Go Public investigative team reported on a burgeoning crisis in Canadian retail banking. Reports strongly suggested many bank employees (both high street and call centre) had come under intense pressure, especially over the last few years, to sell increasing amounts of products and services to customers; the only way to reach sales targets (lose your job or sell) was to, inter alia, cross sell/sell/up sell less appropriate higher cost products/services instead of, at times, more appropriate lower fee/cost alternatives.