ICT Views


Who really IS the customer? Policyholders vs. shareholders

by: (Associate Director, Research and Development) on

I normally try and put a bit of thought and planning into my blogs (although those of you who read them may not agree).

This one is much more ‘on the hoof’. Apparently this is the way it’s supposed to be. So here goes…

The news is…

As part of my role at ICT, I read a lot of news items. One in particular today struck me. Here’s the link: http://www.nytimes.com/2012/03/14/opinion/why-i-am-leaving-goldman-sachs.html

It’s a piece by Greg Smith, whose last day at Goldman Sachs is today. He has opted to resign. His open letter to the NY Times explains why.

I found this story both very interesting and kind of sad. If not all that surprising.
For the sake of clarity – although I have worked for some years in ‘regulated land’ in the UK, I have never worked with Mr Smith, or Goldman Sachs.

Who needs what?

The thing is – generally speaking, financial institutions are like any other sort of business. They have shareholders and targets, and therefore requirements to make profit.

Invariably profit comes from sales.

Sales need customers.

But what do customers need?

Here is the dichotomy. Customers want a product which is suitable for their needs and which performs in the way they have been led to expect. This is essentially what Regulators expect too.

Customers, as a generalisation admittedly, know little about financial products. Advisers (should) do.

Let’s make a comparison. When I go the dentist, it’s because I think I need to get someone to review my dental circumstances and make dental recommendations which will fulfil my dental needs. (I suppose I could undertake non-advised dentistry…maybe that’s expanding the comparison too far).

However, in practice, advisers will be remunerated on a volume of sales basis (quantity & net value) with an input of compliance measure. (Not sure about how it works with dentists).

So we come to the irresistible force of Sales and the immovable object of Compliance. Caught in the middle are the customers and the shareholders.

Where do we go?

Honestly, I’m not sure how this will change. Regulation having an impact on culture and ethics has had a go (Principles & Outcomes based regulation in the UK for example), but underlying all this is the need to make money.

Until this is no longer seen as priority number one, changes will be difficult to make.

Very brave Mr Smith. Good luck to you.

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