Complaints can give you an edge

Learning more about your business through client complaints can give your business a competitive edge.

A 17th century philosopher, Baltasar Gracián, wrote, “A wise man gets more use from his enemies than a fool from his friends.” While complainants are not entirely synonymous with enemies, they inadvertently offer the same opportunity to learn and grow.

A good, practical complaints management framework can assist your business to fulfil its obligations in terms of treating customers fairly (TCF). The appropriate use of your complaints management framework could also help you find out more about what your clients don’t like. This could give you an advantage over your competition.

“Complaint” in this instance is not the formal, written, potential Ombud complaint. Rather, the meaning is wider.

Section 16 of the General Code of Conduct for Authorised FSPs and Representatives says a complaint is a person’s expression of dissatisfaction to a provider or, to the knowledge of the provider, the provider’s service supplier. It relates to a financial product or service that the provider provided or offered.

Further, it indicates or alleges that:

“(a) the provider or its service supplier has contravened or failed to comply with an agreement, a law, a rule, or a code of conduct which is binding on the provider or to which it subscribes;

(b) the provider or its service supplier’s maladministration or wilful or negligent action or failure to act, has caused the person harm, prejudice, distress or substantial inconvenience; or

(c) the provider or its service supplier’s has treated the person unfairly.”

As your complaints management framework must be aligned with TCF, you can use it to your advantage. Consider the following scenario:

I sell short-term insurance underwritten by companies X, Y, and Z. In the last year, numerous clients expressed their dissatisfaction with Company Y, as this company takes longer to pay out claims. Noting these instances of dissatisfaction, I can reconsider whether Company Y is acting in my clients’ best interests. I would rather recommend companies X and Z to clients and keep my clients happy. Alternatively, should my client specifically select company Y, I can inform my client that Company Y often delays the payment of claims, thereby actively managing my client’s service delivery expectations.

Common complaint fallacies
There are many misconceptions relating to an effective complaints management framework. Here are four examples of fallacies:

1. An empty complaints register is a good complaints register.
   While it’s ideal to have satisfied clients, an empty complaints register may indicate that complaints are not being appropriately managed. This not only refers to formal complaints, but any client expression of dissatisfaction, as the General Code of Conduct defines. A thoroughly completed complaints register points out areas where training is needed. It also highlights any product suppliers that may be causing problems for your FSP. Noting these complaints will help your FSP grow. It is also important to keep in mind that in future, the FSCA will make use of FSP data that is gathered through the OMNI-CBR report to compare your FSP against similar business’, thereby identifying any outliers or inconsistencies in terms of average number of complaints and client trends
2. Only formal or serious complaints must be noted in the complaints register.
   A complaint is defined as “an expression of dissatisfaction” related to a product or service. The complainant must at least allege that there was non-compliance, negligence, maladministration or that they have been unfairly treated. However, this definition is very broad and sets the bar low for what must be considered as a complaint, FSPs should ensure that their complaints management process is sensitive to instances which should be considered and dealt with as a complaint. Furthermore, repeat instances of dissatisfaction or routine complaints may indicate a risk which, if not addressed, could lead to regulatory scrutiny or escalated to external complaints resolution bodies such as the FAIS Ombud.
3. A complaint indicates poor service from my FSP.
   Complaints can and should be categorised appropriately. The General Code of Conduct prescribes an investigation of the root cause and minimum categories, which, if scrutinised, align with the TCF outcomes. While complaints relating to advice and services may indicate poor service or a lack of product knowledge, this is not necessarily the case. Complaints data must be analysed to identify the root cause and to identify trends within the business or processes that may require improvement.
4. The FSCA will flag me, or my Compliance Officer will report me, if they discover complaints in my complaints register.
   The FSCA focuses on the protection of clients. Having complaints in your complaints register is not a concern in itself, as long as you have an appropriate complaints management framework to identify trends and issues within your business with the aim of improving those areas to ensure fair treatment of clients, you are compliant with the General Code of Conduct. The FSCA and your compliance officer may be sceptical about your understanding of the complaints management framework requirements and the measurement of client outcomes if your complaints register remains permanently empty.

Feedback leads to information and growth
Actively seeking feedback from clients can assist your business. A lack of recordkeeping or not asking for feedback is not a sufficient way of managing complaints or client dissatisfaction.

Every FSP wants to believe they are flawless, but there is always room for growth. You may discover that numerous clients have the same recommendations or dissatisfactions, which could guide and improve your business process and offering. Using your complaints management framework effectively can assist you to identify trends in your business, avoid the errors that your competitors make and can put you ahead of your competition.