4.9 Marketing Principles, Delivering Quality Service and Handling Complaints
Key Takeaways
Marketing schemes differs from other financial products because of multiple distribution channels, regulatory limits on communications, varying investor sophistication and the pricing and compensation structure.
Quality service rests on knowing the products, managing investors' expectations and understanding investors so that advice suits their needs.
A Scheme Provider must have written complaints-handling policies and keep a register of complaints received and actions taken.
If an investor remains dissatisfied after the Distributor's process, the complaint can go to FIMM and the SC, and disputes involving monetary claims can be referred to FMOS.
FIMM has a disciplinary committee that investigates complaints and acts against Consultants who breach the FIMM Code of Ethics.
Basic Principles of Marketing Schemes
The study guide argues that schemes should not just be "sold": long-term winners build an image, identity and loyalty. Throughout the life of a scheme, from design and approval to repurchase, the long-term needs and servicing of the investor must come first.
Marketing schemes differs from marketing other products because of:
- multiple and alternative distribution channels (direct sales, agency forces, banks and other channels);
- regulatory and compliance requirements that shape every communication (prospectus content, advertising, direct response, sales kits, public relations);
- varying sophistication and product knowledge among channels and investors; and
- pricing and compensation (sales charges, management fees, commissions and incentives).
Why Marketing Sometimes Fails
| Barrier | What it looks like |
|---|---|
| Product awareness | People do not know how schemes could help them, or fear what they do not understand |
| "Not for me" | The Consultant has not identified the person's needs, so schemes seem irrelevant |
| Performance | Some schemes have lagged peers or benchmarks |
| Risk elements | Fear of losing capital; schemes seen as "just like shares" compared with savings accounts and fixed deposits; bad past experiences with mis-selling |
Delivering Quality Service
Most new business comes from satisfied investors and their referrals. Quality service includes:
1. Know your products well
Understand how each fund works so you can match funds to the investor's requirements and resources.
2. Manage expectations
Do not exaggerate. Explain each fund's risks and why particular funds are recommended for the investor's risk profile. Make clear that capital loss is always possible, and explain how distribution payouts, inflation, taxation and investment costs affect returns (section 4.10).
3. Understand the investor
| Factor | Study guide illustration |
|---|---|
| Investment goal | Preserve capital, or seek relatively high returns over time? |
| Investment horizon | Nearing retirement (40s and beyond): stable, conservative funds such as bonds and money market; 30s and 40s: a balanced mix of bond and equity funds; 20s and 30s: can consider higher-risk funds such as emerging-market equity |
| Existing portfolio | Someone fully in Malaysian equity unit trusts may benefit from fixed income or international equities for diversification |
| Age, circumstances and risk tolerance | A young person may have high income needs (supporting parents, student loans); a new worker saving for a house soon may not tolerate equity volatility; someone in their 50s investing for their children may have a long horizon and considerable risk tolerance |
4. Best practices
- Make sure investors understand what they are buying.
- Explain the purchase and repurchase processes and how long they take.
- Keep total transaction time reasonable.
- Be responsive to requests and queries.
Investor Queries and Complaints
A Scheme Provider must establish, maintain and implement written policies and procedures so complaints are handled in a timely, appropriate way and resolved, and must keep a register of complaints and actions taken. The FIMM Code of Ethics adds that Distributors must record complaints properly, resource their resolution, tell investors how to complain and where to seek redress for monetary loss, report complaints to FIMM or the SC quarterly, and promptly notify FIMM of complaints that could harm investors or the industry's reputation.
Common areas of complaint
- Delays in issuing certificates or statements confirming investments.
- Delays in receiving distributions.
- Dissatisfaction with investment performance.
- Poor after-sales service from Consultants.
- Dishonest Consultants, or those using unsubstantiated performance figures to hard-sell schemes.
Handling and escalation
- Address every query promptly; know your schemes, new products and procedures, and new SC and FIMM rules.
- It is not always obvious when a query becomes a complaint; Distributors give guidance.
- The Consultant is usually the best person to handle a complaint first, but must know who to escalate to.
- If still unresolved, the investor can go to FIMM and the SC; for monetary claims, the investor should be told about FMOS.
- FIMM's disciplinary committee investigates complaints and takes action against Consultants who breach the FIMM Code of Ethics.
Handling complaints professionally shows investors their concerns are valued and protects the reputation of the whole industry.
Responding to Common Objections
| Investor says | A response consistent with the study guide |
|---|---|
| "Unit trusts are just like gambling on shares." | Explain diversification and professional management, and offer lower-risk options such as fixed income or money market funds if the investor's profile calls for them |
| "My last agent promised 12% and I lost money." | Acknowledge the experience, explain that returns are never guaranteed, and set realistic expectations based on the fund's objective and risk |
| "I don't have much money, so it's not for me." | Point out that schemes can start with small amounts and regular savings plans |
| "The fund did badly last year." | Show performance against its benchmark and peers over several periods, not just one year, without forecasting future returns |
The aim is to address the barrier honestly. Overcoming an objection with exaggeration only creates a future complaint.
According to FIMM's study guide, who is usually the best person to handle an investor's complaint initially?
The Consultant
FMOS
The Trustee
The SC's investor affairs department
An investor's complaint involves a claim that she lost RM15,000 because of a Consultant's misrepresentation, and the Distributor's process has not resolved it. Where should she be told she can refer the dispute?
The Private Pension Administrator
Bursa Malaysia
The Financial Markets Ombudsman Service
The Companies Commission of Malaysia
Which of these is one of the three elements of delivering quality service described in the study guide?
Offering cash rebates to new investors
Managing investors' expectations
Recommending the fund with the highest past return
Guaranteeing a minimum return to every investor
Sections you finish are checked off in the contents.