FCA is ‘on the lookout for firms with poor systems and controls’ (1) following Santander’s £33m fine
The Financial Conduct Authority (FCA) has fined Santander £32m for failing to effectively process the accounts and investments of deceased customers. The £32m penalty was reduced from £46m*and when adding the significant costs involved in running the subsequent multiple year remediation programme, paying customer interest charges and consequential losses, the £32m figure is indeed the tip of the iceberg.
The bank will certainly not be alone in failing to effectively manage the complexities involved in the bereavement process and all financial services firms should pay close attention.
So where did the bank go wrong in the FCA’s eyes?
- Not transferring funds totalling £183m to beneficiaries affecting 40,428 customers
- Failure to disclose information relating to the issues with probate and bereavement
The regulator also commented that “these failings took too long to be identified and then far too long to be fixed… firms must be able to identify and respond to problems more quickly especially when they are causing harm to customers… and will take action to ensure customers are properly protected.” (2)
The bank breached Principle 3 and Principle 6 “by failing to take reasonable care to organise and control its probate and bereavement process responsibly and effectively, with adequate risk management systems, and by failing to treat its customers and those who represented them on their death fairly.” (3). It also breached Principle 11.
How did this happen?
Many financial services firms don’t prioritise initiatives to create an accurate and up-to-date single view of the customer. Only around one-third of the sector are running defined customer experience programmes, so traditional financial services players lag the example set by their peers in retail and travel. Without a single-view-of-customer, in some cases, the customers themselves may be the only individuals who have full understanding of their financial position, their motivations and wishes for their investments. This gap is fully exposed when the customer then passes away.
Some of the issues that can arise from the lack of a single view of customer upon bereavement include:
- Inability to identify multiple accounts and investments that are part of a deceased customer’s estate and redeem or transfer the asset – Most financial services firms don’t have a customer-centric operating model and are product-centric, or organised by functions and services. This makes creation of a single view of a customer very challenging. Without the necessary investment in process, data and technology, it often requires considerable manual processes that are both error-prone and time consuming, involving multiple departments, people and systems.
- Too many bereavement cases are open for too long and tracking is insufficient – Due to the number of internal employees involved in tracking down the various funds and a lack of a dedicated customer contact or standard process, organisations can easily lose track of where they are in completing all the required activities of the Bereavement process.
- Lack of monitoring in relation to open cases – If you can’t easily reference a deceased customer’s estate at outset, nor have a standard, flexible process for each product, it is very difficult to design any form of comprehensive case-tracking tool and metrics meaning that the transfer process is drawn out for extended periods of time.
Organisational controls compound these challenges, but they aren’t insurmountable
- Applying for grant of probate is time-consuming and confusingly for the customer, thresholds vary – Typically the threshold sits between fund levels of £25,000 and £50,000, but as the threshold varies per organisation, customers may not realise they require a grant thus further delays are already added to an already time-consuming process. Thresholds are typically set due to risk appetite of the organisation; given the emerging regulatory risk of delay, probate threshold policy should be reviewed.
- There is no industry standard for proof of death – Each organisation has a different process both to authenticate the executor and the deceased, e.g. submission of death certificate, is original or electronic paperwork needed, how do you ID&V an executor if they are not an existing customer, etc. This process can easily be streamlined, as the Death Notification Service does. More on this in our second blog in the series.
- Beneficiary contact information can be out of date leading to extended processing times and untraceable recipients – A pension or life insurance policy holder may complete an ‘expression of wish’ nominating who they wish to receive benefits upon death. Beneficiaries ‘override’ a will, but Pension Scheme trustees/administrators have the final rights to approve recipients and disputes can occur. There can be little, if any, initiative shown by financial services organisations to endeavour to keep this beneficiary information up to date prior to a bereavement.
Demonstrating proactive management of any remediation activity to the Regulator using iterative delivery
FCA commented that Santander have been running a remediation programme to tackle these issues for over two years. Not only will the impact to customers and asset leakage continue for timescales far beyond acceptable, the operational costs to Santander in conducting such a long-running remediation would be formidable. In the third part of our series, we’ll describe how taking an iterative and transparent approach to any required remediation and CX improvements reduces your risk and allows you to ‘respond to problems more quickly especially when they are causing harm to customers’ (5) and avoid further regulatory scrutiny.
Turning the regulatory challenge into a customer excellence opportunity
Informing organisations of a bereavement can be a very long, hard process indeed, exactly when people need it to be easy. When it is often loved ones that are executors or beneficiaries, this process is prolonging and adding to already one of their most emotionally difficult times in the customer’s life. In addition, funds not transferred to the beneficiary promptly and, in some cases, not transferred at all, compound and draw out the process. Tardiness also leads to loss of interest on the funds that customers would be entitled to.
In the second part of our series, we’ll discuss how improving your Customer Bereavement Experience not only allows any potential regulatory hot spots and process gaps to be identified, but also how you can leverage your organisation’s bereavement processes to demonstrate Customer Experience Excellence, improve your organisation’s reputation, increase asset retention and attract new customers.
Our North Highland team work with clients to perform Bereavement CX Discovery Reviews over typically six to eight weeks to deep dive into the Bereavement Experience, capturing customer journeys, identifying issues and root causes and deliver recommendations with an implementation plan. The stakes have never been higher. Have you taken steps to understand your regulatory exposure and customer pain points related to the bereavement experience?
If you’re interested in finding out more about the risks and opportunities associated with the bereavement experience, contact our Financial Services Customer Experience team.
* as Santander did not contest the FCA ruling
This blog was co-authored by:
Sarah has over fourteen years of experience guiding Financial Services organisations to improve innovation, efficiency, customer-centricity, and speed-to-market whilst meeting regulatory demands. Named on Innovate Finance’s Top 200 UK Women in FinTech Power List, Sarah has worked across the Financial Services sector within consulting and industry in Insurance & Pensions, Banking, Capital Markets, Wealth & Asset Management, Regulators and FinTech. Sarah’s own specialisms and passions include Customer Experience, Client On-Boarding, organisational agility & agile culture, complex global programme management and enterprise wide Agile transformation and Agile Portfolio Management.
Emily has over seven years of experience helping clients improve their Customer Experience (CX). Her expertise spans customer strategy, customer insights, and product and service design. She manages dynamic teams combining design thinking with best practices in driving customer-centric change to enable successful delivery of CX solutions. Emily has a background in psychology and is passionate about helping clients build capability, develop their people, and use behavioural science to inform design. She brings cross-industry experience, with a focus on Financial Services and Public Sector clients.