managing mystery shopping programmes to maximise consumer protection and regulatory compliance

1 © GfK November 15, 2016

Compliance mystery shopping

MRS Financial

Service Conference 2016

17th November 2016

Leslie Sopp, Chief of Market Research, FCA

Andy Firth, Head of Financial Services, GfK Mystery Shopping


In the last few

years Financial

Services firms

have faced

significant fines

and customer

pay-outs


Source: Standard and Poor’s 2016

Mystery shopping can

help reduce

the burden of

mis-selling

fines/payouts. Summary

Over £70bn in conduct and litigation provisions

between 2011 and 2015.

Fines from the regulator and customer claims.

Compliance managers need to know ‘how can we make sure staff are

being compliant?’

In the face-to-face environment ‘’real’ behaviour is very difficult to

monitor via internal audits or customer feedback.

Mystery shopping fills that ‘gap’.


Why the FCA

uses mystery

shopping

This presentation will examine how both the FCA and the firms

they regulate use mystery shopping to assess sales compliance.

The FCA’s primary aim is to understand how firms operate;

and the main aim of firms is to ensure compliance.

We will demonstrate best practice in assessing compliance

via mystery shopping; with the aim of ensuring that staff

follow compliant processes and ultimately reduce the burden

of pay-outs and fines.


FCA use of

mystery

shopping Mortgages

Investments

Advice


Why mystery

shopping

Remove customer

recall or post-hoc

rationalisation issues.

Direct ‘observation’ of

the customer/adviser

interaction.

Unadulterated.


Why mystery

shopping over

customer

research

They do not know:

What they are supposed to be asked,

What information they are to be given, nor

What they do (to an extent)

Assess the personal qualities of the adviser, including:

Asking the

customer fails

because the

customer does

not know what

they don’t

know!

What does the

customer

know?

What FCA rules and regulations are. Professionalism

Polite

Communications skills


Mystery

shopping vs

consumer

feedback

The customer understands and can comment

on their satisfaction with

the service.

The customer cannot comment on whether the

service that they received met the regulatory

requirements of the FCA.

Mystery shopping fills this gap by allowing those who know the

regulatory requirement to ‘observe’ and assess the customer/adviser

interaction against the applicable rules.


Have a Q&A process to validate the assessments

Identify the types of firm to be covered

Identify the customer profiles

Understand what we want to assess.

Develop the assessment or evaluation scheme for the

sales activity

Stages

The FCA mystery

shopping

approach – I


The agency

It is important to work with an agency

that has the following:

A large, varied & geographically

dispersed shopper workforce;

Has experience of and understand the

workings of financial products and services;

The workforce are willing to use their

real personal details as part of the shop;

The FCA mystery

shopping

approach – II


The FCA mystery

shopping

approach – III

The shop will be taken through to different end points from enquiry to product

acceptance, depending on the project.

Removing scripts mitigates against the shopper ‘leading’ the adviser.

We do not provide ‘scripts’ to the shoppers, preferring a broad

briefing which allows them to use their own experience/details

to complete the shop.

Shoppers are recruited with a variety of profiles to allow a

range of scenarios to be tested.

The

shopper

and

scenario


FCA shop vs. the

standard shop

FCA mystery shops

Traditional

mystery shops

Shops are audio recorded

FCA assesses the shops

against regulatory rules

Shopper questions only on

factual outcomes

Shopper uses their

real details

The shops are not

necessarily audio recorded

The shopper provides the assessment

of the shops (shopper questionnaire)

Shoppers can fabricate (personal)

information

Shoppers not qualified to determine whether

interaction is compliant with FCA rules

The adviser is not assessed

on their ‘professionalism’

The FCA mystery

shopping

approach – IV


FCA

assessments

of the shops The FCA receive

the audio and

all related

documentation

Each assessment

is based on a

score-card

(developed by the

project team to

assess regulatory

compliance)

Shops graded as

pass, fail and

unclear with

gradations;

undertaken by

experienced FCA

assessors

The FCA mystery

shopping

approach – V

10

1


Reflecting the

Regulator

Audio recordings

Profiled

shoppers

Effective briefing

Assessment to

the point of

purchase/

recommendation

Detailed quality

controls

If the primary

aim is to monitor

compliance

levels, it is

important to

ensure best

practice.


Going beyond

compliance

Firms will often

use a compliance

mystery shopping

to assess other

factors. This has

pros and cons.

Pros Cons

Ability to assess additional

products (e.g. Life Insurance on

the back of mortgages)

Other factors such as sales process

customers experience etc.

Areas such as marketing materials

Likely to involve multiple

stake-holders and lose the focus

Asking shoppers to do more can

impact on quality

Compliance performance can

offer ‘contradict’ customer

experience scores.


Relevant Realistic Representative High quality Analysable

and actionable

Our view and

how we do it

In order to get the

most out of

mystery

shopping, the

study should be:


Mortgages

Investments

Credit products

Insurance products

PPI

Focus on regulated

products and

specifically those

which the regulator

may be reviewing or

where there are

‘issues’. Previous

work includes:

Relevant


In order to

get the most out

of mystery

shopping, the

study should:

Realistic

Focus on common

enquiries and minimise

unrealistic questions /

prompts

Use shoppers who meet

the profile of the product,

using market

measurements such as

the FRS.

Instruct shoppers to come

prepared with necessary

paperwork and briefed to

deal with specific

questions.


However, huge samples are

not generally required.

A geographical and branch-type split

may be important.

Ensure that shoppers assess localities with

staff members who can assist (e.g. advisers)

For the regulator it is

important to have a

representative view of the

market.

Representative


Quality is an

absolute key

requirement, as

poor quality can

increase costs

and time.

High quality

Shoppers are key and the relationship between the project team

and the shoppers is equally important.

The quality of the audio is also vital.

All audio and paperwork needs to be thoroughly checked

and validated.


Audio recordings

need to be

analysed. Unless

the agency has

regulatory experts,

this tends to be

done in-house.

This requires:

Otherwise, more simple mystery shopping approaches can be used, such as non-audio.

A project team to action the data.

Identify the customer profiles

Resource to listen / analyse.

Often the ability to deal with credit checks.

Analysable and

actionable


Mystery shopping is an

important tool for both the

regulator and regulated in

providing an independent

view of these issues.

In the current

environment, treating

customer fairly and

compliant selling are

key considerations

Record fines have

resulted in firms

reviewing their

distribution

channels and

the way

they approach

regulated sales.


Thank you

managing mystery shopping programmes to maximise consumer protection and regulatory compliance

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