Key takeaways

  • New regulations aim to ensure financial services customers are sold the right products for their circumstances.
  • For product issuers and distributors, such as banks and mortgage brokers, reasonable steps will need to be taken to meet the objectives of the obligations.
  • Cloud-based technology can be used to alleviate the burden of additional compliance hurdles while providing great customer experiences.

Imagine walking into an auto dealership needing to buy a family car for the growing brood, and after getting advice from the sales staff, you walk away with a high-powered sports motorcycle. It’s a pretty unlikely scenario.

While that may be true in the world of vehicle sales, in financial services, customer choices aren’t quite as clear. Not all consumers can spot the differences between financial products, and many rely heavily on sales staff to help guide their decisions. 

Unfortunately, as the recent Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has shown, this can lead to product sales which are not in the best interest of the customer. 

New design and distribution obligations (DDO) will be introduced in October 2021 to tackle this problem and will require financial services product issuers and distributors to take reasonable steps to ensure customers get the right products.1

What will the DDO mean for the financial services industry?

Under the DDO, product issuers (for example, banks) and product distributors (banks or third-party mortgage brokers) are responsible for ensuring that customers are sold products that meet their needs, objectives and financial situation. 

For product issuers, reasonable steps must be taken to oversee their distribution system. This includes selecting the appropriate distributors, implementing proper supervision, monitoring distributors and reducing potential conflicts of interest. 

Similarly, distributors will be responsible for their operations complying with the DDO by measures such as implementing the right incentives, complying with distribution conditions and ensuring they have effective product governance arrangements.*

Customer-centric flexibility

When a customer wants to buy a product physically, they will talk to a human salesperson. Humans, however, can exercise discretion and while many customers want a human experience, inconsistency over decisions can lead to bad customer experience. To address this, distributors must implement processes and controls that help guide staff towards consistent outcomes.

The introduction of additional compliance requirements, however, has the potential to overburden sales staff with processes and controls. This could impact morale by reducing autonomy or placing the burden instead on the customer if they are forced to show that they are in a certain target market. Managing the right balance will be key.

A culture of learning and positive reinforcement can help minimise the need for overly onerous processes and controls, keeping staff motivated and customers happy. In this environment, staff are rewarded for doing what is right (eg. distributing products to the right target market) while also being given the opportunity to adapt behaviours in small ways that better meet requirements (instead of being expected to make major changes to the way they work at specific points in a year). 

Establishing such a culture needs the right technology to engage sales staff, helping them learn to better serve customers by promoting consistency through feedback.

Using technology to drive behaviour

Driving a culture of learning and positive reinforcement can be a challenge, particularly for large and/or dispersed distributors. However, cloud-based technology can help monitor, diagnose and address cultural issues to drive the right behaviours in sales staff. As employees learn more consistent ways of service and become further engaged, customers experience better service. As a starting point, consider technology that can address the following areas: 

  • Understanding what employees feel: Regularly monitoring whether a culture of continuous learning and positive reinforcement exists can be done through feedback or survey platforms. These can help identify pockets where staff are not engaged, or not learning, feel they need more development in particular areas of the DDO, or flag problems with its implementation (for example, where leaders are not walking the talk). 
  • Proactively diagnosing and addressing development opportunities: Identifying staff development opportunities and pushing tailored content through a staff management or learning platform can help drive learning. Further, creating interactive or gamified content (such as virtual customer games or application scenarios) could help with retention and application of DDO requirements. 
  • Gaining insight into the customer’s perspective: The bottom line is that distributors need to know that the customer is getting what they want. Live customer feedback loops that lead from customers back to staff members and are recorded at an aggregate level can help both employees and the organisation identify opportunities to improve and behaviors that will make it easier to adhere to DDO requirements.

The opportunity for a win-win situation  

By implementing cloud-based technology that helps monitor, diagnose and address cultural issues relating to continuous learning and positive reinforcement, product distributors will be able to drive compliance with the DDO whilst also ensuring their staff are not overburdened by rigid processes and controls. Instead of thinking of the DDO as another regulatory hoop to jump, technology can be used to engage staff in its implementation and continuously improve how they do so. Remember, sales staff are brought in to achieve better outcomes for customers and business alike, so at the end of the day, getting the implementation right will be more than worth the effort.

*While the DDO applies to all channels (ie. both self-serve and assisted), this article only considers assisted channels.


Digital Pulse: Michael Ng


Michael Ng

Michael is a senior management consultant within PwC Australia’s customer strategy practice.
More About Michael Ng