Here we are again, talking about unethical sales practices in the financial services industry.
The Youi fiasco, first reported by Fairfax on August 28, potentially offers one of the worst examples of unethical sales behaviour and bad sales commissions plans I have ever heard of. If the reports by the inside whistleblowers about the way customer leads are distributed and commissions are paid are to be believed (and I have no reason not to, given the overwhelming number of consumer complaints), then we have every right to be disgusted.
If these complaints are accurate, they get an epic FAIL when it comes to consumers’ trust and delivering something they promised. Sadly the company’s ‘we get you’ slogan seems more like ‘we got you, sucker’.
We shouldn’t forget the recent Commonwealth Bank’s CommInsure debacle and many other troubling stories that seem to emanate from the financial services industry all too often.
The issue with paying sales commissions in the financial services industry is this: When we engage a financial planner, are we getting independent financial advice for a specified fee, or are we getting the products this salesperson gets paid a (or the best) commission on?
Or, if we engage insurance salespeople who say they offer customised insurance policies to suit our situation –remember Youi’s catch cry “We get you”– are we sure that we will get the right products for ‘our’ situation?
Issue number one
Problems arise for the financial services industry when people using the “product sales model” try to pass themselves off as the “independent financial adviser” or as offering a “customised” products model. All this does is create competing motivations like: “Do I give my client what is best for them or best for me?”
The issue with this approach is that consumers are at more risk of getting products that make the most money for the broker, planner, or insurance salesperson, not the best product or solution for them. Given they are meant to be the product and subject matter experts, consumers rely on them to tell the truth and offer unbiased advice.
This is a current persistent problem for some in the financial services industry – they just can’t seem to get their moral compass right. For instance, last year we turned down a sales training assignment with a large insurance company which stated it was customer centric but it turned out this was just rhetoric as the sales teams were paid different commissions for different products and had no intention of being there for the customer.
Issue number two
Things seem to be getting worse, not better. If the reports are indeed true, Youi has taken the issue of paying commissions to their insurance salespeople to a whole new stratosphere. This is like the Armageddon of sales commissions battles. As Fairfax reported:
“Youi tells its sales staff they can earn huge commissions. But commissions are not reliant on the number of sales; rather, staff get bonuses based on how many more sales they make than their workmates.
“A computer determines how many inbound customers are routed to each sales team member. The computer ensures people who sell more policies get more calls, and thus commissions.
“Sales representatives are literally competing against each other for commissions from a central pool. One person’s success is another person’s failure. This breeds both a toxic, high-stress environment – and encourages unethical sales tactics.
“Not all sales staff are doing the wrong thing, but a large proportion are. The problem for staff who want to do the right thing, whistle-blowers say, is they lose commissions to those prepared to do the wrong thing. That puts pressure on everyone to act unethically.
“ ‘They want you to get the sale no matter what. They want you to brush past questions,’ says one whistle-blower.”
What sales manager in her/his right mind would have such a system at play in their sales teams? What chief executive would let this type of practice be the mainstay of their business?
The competing motivations that arise from people selling products with a commission structure attached as their main source of income, or people competing against each other for sales leads, means they cannot truly act in an independent capacity to properly assess customer needs. Instead these people become more concerned with how to get paid rather than how to provide better advice for their clients.
There needs to be a wholesale change to the reward systems in the financial services industry.
Firstly, we need to take the worry of money off the table for these sales teams and pay them a decent salary so they don’t have to keep worrying about their next pay cheque and instead focus on looking after the customer by providing sound advice and information so the customer can make an informed decision. The first insurance company to do that will have more customers than they can handle.
The prevailing rewards system in this industry does the reputation of selling no good because it breeds people who are not after prospects and customers, they are after victims. And while there are honourable independent financial advisors working in the sector, they are sadly too few and far between.
It’s on to our lot, the consumers, to be ever wary of the financial services industry given the dreadful legacy they have created of greed, deception, fraud and corruption.
An Australian Senate inquiry or royal commission into banking and financial services cannot come soon enough.
Remember everybody lives by selling something.