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Perspective
16 Feb 2021
5 minute read

Remediation Solutions in Australia

Thematic root causes across Australia's highest profile customer remediation programs

Jonathan Perkinson

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Jonathan Perkinson

Deloitte - Australia
Jonathan has over 18 years of professional services experience providing advisory and assurance services to financial services clients in Australia and the US. Jonathan is a Partner in Deloitte Managed Solutions which designs, builds and runs bespoke remediation programs. Australia's 2019 Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry identified that trust with customers had been broken, and that the sector required remedial action. Jonathan leads a number of Ausralia's largest financial advice quality and fee for no service (FFNS) remediation programs. Jonathan is known for bringing technology-led solutions to large-scale remediation. Prior to his time with Deloitte Managed Solutions, Jonathan was the founding partner in 2014 of Deloitte Australia's payments advisory practice which focuses on supporting banks, government and corporate clients react to a rapidly changing payments landscape.
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Deloitte is Australia’s undisputed leader in customer remediation managed solutions and has supported the delivery of dozens of Australia’s highest profile and largest remediation programs.  Recently, Deloitte Managed Solutions (DMS) has undertaken a root-cause scan across these programs and identified over 70 discreet issues that have helped contribute to behaviours that resulted in the eventual need for customer remediation.

It is often said that those who forget the past are destined to repeat it.  As Australian businesses touched by the 2017-19 Hayne Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry move beyond remediation of past misconduct to preventing it in the future, it is imperative that businesses reflect on these historical issues and assure that governance and controls are now in place to address those issues consistently and completely going forward.

Leading businesses are not leaving the future to chance.  Instead, we see leading businesses undertaking self-examination across that broad range of potential misconduct issues. They then capture and strengthen the related governance and control frameworks.  This article has selected three common illustrative examples of misconduct issues that resulted in the need for customer remediation, and the steps businesses have taken to address those issues.

Rewards and Incentives (product)

Incentive structures reward employees in sales roles to encourage switching of products or increasing the consumption of a product resulting in inducing a customer to switch or over-consume a product unnecessarily.

Examination of incentive structures to employees in sales roles to identify the specific sales behaviours such incentives would be reasonably expected to drive.  Further examination of where expected sales behaviours could result in mis-selling of products.  Where risks are identified, adjustments could be made to the incentive structure and/or additional evaluation criterial could be introduced to affirm product suitability as a pre-cursor to sales. 

Controls should address:

  • Initial product suitability to customer needs criteria are established and operationalised into the sales process
  • Ongoing customer benefit realisation criteria are established and operationalised into periodic product performance and compliance reviews
  • Ongoing employee incentive structures are resulting in expected employee sales behaviours
  • Structured, clear and effective consequence management.

Compliance and Conflict of Interest Management

Compliance team structured within a business’s chain of command may be influenced and thus are unable to be operationally independent.  This results in ineffective and inefficient use of resources.

Inspection of existing process and controls to identify any short comings. Separation of compliance from business objectives at all levels and aligning employee targets to successful completion of compliance steps. Further, implementation of automation and standardised compliance requirements drives efficient and consistent findings. 

Controls should address:

  • Incentives for employees whom achieve high compliance ratings
  • Structured, clear and effective consequence management.
  • Continuous and targeted training for all employees regarding the importance of compliance standards

Information Asymmetry

Business has a responsibility for both the positive and negative aspects of advice provided on all products ranging from superannuation to buy-now-pay-later. This is due to the knowledge imbalance between business representatives who are professionals trained in a wide variety of financials concepts and strategies, and consumers who may have no or little financial education. Owing to the information imbalance, business hold a position of power over consumers.

Active education of consumers in all aspects of their financial affairs by business and validation of consumer understanding prior to sales. Inspection of expected consumer behaviour to identify outliers and the validation of consumer decision making.

Controls should address:

  • Standardised documentation to evidence services provided by business and understanding of consumers.
  • Continuous training on the importance of consumer understanding and education.

The above are just a few of many illustrative issues that businesses are addressing to prevent future misconduct –regulators and society alike will give little leeway to businesses that fail to take issues identified in the Royal Commission to heart.

DMS is playing a key role in helping Australian businesses move forward with confidence that they have consistently and comprehensively addressed relevant risks of misconduct – and that their regained trust from customers is well placed in their business.

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