COMMENT: PLATFORM; Time to look at regulation in a different light

Improved performances by companies will go a long way towards taking the sting out of regulation, says Kit Jebens

Improved performances by companies will go a long way towards taking

the sting out of regulation, says Kit Jebens

Persuading managements to change their tunes for the improvement of

their firms relationships with the media, the public, their investors or

their customers may be a little easier than persuading them to take a

new approach to their regulators. More and more industries are being

drawn into the regulatory net and those that are caught find that it

brings increasingly heavy burdens of cost and complexity.

Generally the reaction to advancing regulation is defensive. It takes

the form of setting up bureaucratic structures and responsibilities

supervising tight auditing arrangements and stilted compliance rules for

those in a firm’s front line of commercial development and sales.

Good media relations depends as much on the quality of a firm’s business

as it does on its expertise in dealing with the press. Good regulator

relations depends just as much on the same properties. So long as a

financial services firm’s culture requires detailed bureaucratic

defensive measures, regulators will insist on them.

Most firms, in the personal investment field at least are severely

constricted by the traditional way they go about their business. Only a

radical shift to a new basis, which permits and favours good customer

care, will enable the regulatory load to be eased.

So long as products, marketing remuneration systems and management

continue to operate in traditional, anachronistic ways, the possibility

of escaping from the regulatory burden remains remote.

Products need to be developed to meet customer needs, rather than to

make them easy to sell. This entails making them simpler to understand.

Most customers are, for example, not interested in the technical

mechanisms, but they are interested in having simple answers to the

questions like ‘What will it do for me?’ and ‘What does it cost?’.

In addition to promoting simple clear documentation it should be

possible, for example, to separate protection from investment. It should

also be possible to design products with greater flexibility of

contribution to allow for changes in customer circumstances.

Modifying remuneration systems is, in most cases, essential to changing

sales culture. The popular belief that commission is bad and salary good

is a myth. What is needed is a remuneration structure that rewards good

performance without biasing sales towards any particular product in

preference to another, and which rewards quality as well as quantity.

It is quite unrealistic to consider remuneration systems which do not

reward quantity as well as quality. It is therefore vital that a

corporate ‘conscience’ is developed to guide sales people and ensure

that excess profit is not as customers’ expense. This is a

responsibility of all levels of management. The tone has to be set by

the chief executive and its delivery must be monitored and reported to


These are difficult messages to get across, but consultancies need to

understand that the media image of a firm is closely dependent on its

regulatory performance. They need to concentrate their persuasive

efforts on a shift of management emphasis from defensive self-protection

to a more positive concept of changing sale and marketing culture by a

combination of structural redesign, sales training and management


Kit Jebens is the former chief executive of LAUTRO

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