The FPA during COVID-19 with Graeme McAusland

Funeral Planning Authority CEO Graeme McAusland joins Malcolm remotely to get the regulator's view on COVID-19, how new rules put the customer first, and the future of funeral planning.

Transcript

Malcolm Flanders [00:00:04] Welcome to our latest podcast, and I'm delighted to be joined by Graeme McAusland, Chief Executive of the Funeral Planning Authority (FPA).

Malcolm Flanders [00:00:12] As we all know, regulation of our funeral planning industry will formally take effect within the next two years, under the direction of the FCA. But in the meantime, we remain guided and directed by the FPA to ensure customers are treated correctly in regards to the sale of funeral plans. As a consequence, Graeme and his team have recently introduced a new code of practice which all providers must adhere to, which includes a requirement for all providers to maintain a policy for treating customers fairly, as well as a clear policy towards vulnerable customers.

Malcolm Flanders [00:00:45] A further requirement of the FPA is that all our sellers of funeral plans must enter into a formal agreement, which frames the correct way of doing business from a customer perspective, and you will be hearing more about this from us over the coming months. This clear orientation towards ensuring our customers are properly looked after applies equally to our selling funeral director partners and to Golden Charter itself. 

Malcolm Flanders [00:01:15] So, Graeme, a very warm welcome to this podcast. Thanks very much for joining us. Can I start, please, by asking you to explain what went into developing the updated rules and code of practice? What were the most important aims from your perspective? 

Graeme McAusland [00:01:33] Thank you, Malcolm. It's good to be here, even if the circumstances we find ourselves in are somewhat unusual.

Graeme McAusland [00:01:40] I think when we started looking at the rules and the code of practice, our intention was that we made sure that we updated them with a focus on making things better for customers. And in particular, vulnerable customers. We were also focused on trying as much as possible to ensure that customers were protected if things changed or went wrong. And so this resulted in a number of requirements for providers in terms of explaining their arrangements for funerals in greater detail and putting in place things like requirements to allocate plans. So it was all about trying to make it more secure for customers.

Malcolm Flanders [00:02:19] Thank you, yes I get that. So why is it that we need a formal agreement between providers and funeral directors? Why is that now necessary?

Graeme McAusland [00:02:29]The way we see it, it's a key part of the customer delivery chain. So if there's nothing that exists, there's a gap between what the customer bought and what might be delivered. And sometimes that gap might just emerge by mistake, because it doesn't need anyone to be doing anything deliberately wrong.

Graeme McAusland [00:02:48] I think there's been a lot of focus on intermediaries in this market and indeed some poor behaviour by intermediaries. And we've made it very clear, publicly and privately, and indeed now in our code, that the provider is responsible for the behaviour of intermediaries.

Graeme McAusland [00:03:05] Now, funeral directors are, of course, different from third party intermediaries, but they still, in terms of the funeral plans, sit between the customer and the plan provider.

Malcolm Flanders [00:03:15] Yes.

Graeme McAusland [00:03:15] And therefore the plan provider clearly has responsibility for the behaviour of funeral directors selling and enacting their plans. So given that, we think there needs to be a contract in place. I think we are very conscious that, handled wrongly, that may feel like it's providers telling funeral directors what to do.And in a sense, there is an element of providers saying "our requirements are this”, so there is an element of that. But I hope the sensible plan providers will understand funeral directors they are working with, and also sensible funeral directors will understand the challenges that providers face. One of the things that we did was to enhance our disciplinary powers, and plan providers will have to demonstrate that they have that appropriate oversight of the funeral directors they work with. To do that without a contract is, well, it's very difficult and probably impossible.

Graeme McAusland [00:04:05] The way this market is going, the planning companies will be the regulated entities. They're the people the regulators are going to come after if things go wrong, and therefore their motivation for putting in place requirements is driven by that. I'm sure you guys, for example, don't really want to run funeral directors' businesses. It's not what you're there to do, but if you have a responsibility, and if something goes wrong, the regulartor's going to come along and say, "we're going to fine you," or maybe in FCA-land, "we're going to ban you as an individual director from being part of this market”. I think I would just ask funeral directors to think about that, and then think about how they would deal with that. That's an imposed situation that you guys and everyone else is going to have to deal with.

Malcolm Flanders [00:05:03] Okay. Thank you, Graeme, and we have been giving a lot of thought, and we will be coming out to our funeral directors in the next few weeks as to how we're going to help them with this process, because it's very much in the interests of both of us to get it right as we roll this out. Thank you.

Graeme McAusland [00:05:21] I think, sorry Malcolm, the other part on that is that if it's done right, it should be better for the customer, and it should be better if something goes wrong, because it will be clearer as to where the responsibility for different things happening lies.

Malcolm Flanders [00:05:38] Okay, just stepping back a little bit then, how do you think the funeral planning industry is doing as a whole? Have you seen efforts from plan providers to examine what we're doing and to put the customer first?

Graeme McAusland [00:05:53] That's a big question. I think my feeling is that the industry's professionalised quite a bit over the last few years. And certainly speaking for the FPA registered providers, I think their approach to things has in a number of areas improved. We're certainly getting more information and we're challenging providers better. And that's, I hope, helping a little bit. But we do think things like sales processes are generally better. Control over things like intermediaries are better. I'm sure there are still areas that could be improved. I think there's been a growing maturity around dealing with complaints, and what I mean by that is coming at it from, "actually the customer’s got a point here," rather than trying to defend the organisation.

Graeme McAusland [00:06:42] I think there's probably more work to be done, some more pessimism about what could go wrong. I mean, in a sense, the current situation has tested that in quite a strong way. I think that kind of risk management type of approach and really digging down as to what can wrong. 

Graeme McAusland [00:07:03] I think we've been happy that firms are still engaging constructively with us. Both the firms who FPA registered, but also a few others who've been seeking registration, and I think that's good. Clearly, there are still some firms are outside our regime, and that still continues to be a concern, and we continue to give our message of, "customers, don't work with them, and funeral directors, don't work with them”. That's a fairly blunt message, but I think we've now got a period up probably until FCA regulation comes in, where some firms are going to either not seek authorisation with the FCA, or are not going to be able to achieve authorisation with the FCA. At that point, there will have to be a transfer or a wind up or something. And I guess one of their key concerns is making sure there's enough money there if that happens to not leave customers in a bad place.

Graeme McAusland [00:07:59] So my sense is that the market has matured and it's overall it's in a better place than it was a number of years ago. 

Malcolm Flanders [00:08:07] Thank you. Yeah and my take from that is, as markets mature then standards do rise and, to your point, a higher level of professionalism is required, and other industries have gone through the same sort of change. Yeah, get that. Thank you.

Malcolm Flanders [00:08:24] Now, talking of change, the FPA has also gone through a programme of modernising. Can you share with us some of the work that you've been doing to refresh the FPA structure and the way it goes about its business?

Graeme McAusland [00:08:39] It's quite radically different from what it was a few years ago, and certainly when I joined, and I think it's probably fair to say that anyone who was involved a few years ago wouldn't really recognise the organisation now. In terms of governance, we have a genuinely independent board. They are just completely independent of the industry. In terms of people, pretty much everyone has changed. This is since I joined at the start of 2015.

Graeme McAusland [00:09:08]The operation, we're just much more professional. So we're much more robust in following up points, and things like complaints, we are on top of that and we're dealing with firms in I hope a professional but a certainly very robust way, in terms of trying to support customers.

Graeme McAusland [00:09:29] We've got a very good compliance committee, who are very – well, they're not easily satisfied when they're interested on a particular point. And I think that's really important. That's what they should be doing. I feel like actually we've done a decent job moving the regulatory environment to a better place.

Malcolm Flanders [00:09:49] Thank you. Yeah, from my perspective, I think the FPA has done a very good job in changing and it does act as a very real stepping stone. So thank you, I understand that.

Malcolm Flanders [00:10:01] A while ago you referenced the Trust. Now, we recently spoke with The Golden Charter Trust on this podcast, and with COVID-19, equity values, as we know, around the globe saw sharp falls. Much of the world economy effectively shut down. Now, the Trust was quite comforting about the long-term security of plan holder funds. To what extent do you keep an eye on our trust and the other trusts of providers generally in the market? 

Graeme McAusland [00:10:26] Well, each provider has to submit statistics to us on a quarterly basis, at the end of each quarter, and for the trust based one that's split down into different asset classes. So we just track that using movement of indices. So when the market fell off the edge at the end of March, we had a pretty good idea where every one of the providers were. 

Graeme McAusland [00:10:54] And what we’re really kind of focusing in on there is the amount of assets per plan, because that's an easy measure for us to see whether things are going quite badly wrong. And I think what we saw is, in the main, clearly people have assets in equity markets and they fell. But the financial resilience, I think it was pretty good, and that's largely because most of the portfolios are pretty well diversified. So it is something we'll continue to keep an eye on, but I think we were largely reassured by how well things have held up.

Graeme McAusland [00:11:34] I think the only other thing I'd say, in relation to the current situation, and it's less about the financials, but it's more about the operational resilience of firms, is actually I think we've been pretty impressed that firms have been able to keep the businesses going, get working from home and get that work in. And, you know, I think since it all really began to become very serious, we haven't had to complain about service and operations across any of the providers, which I think is very, very good.

Malcolm Flanders [00:12:10] That's good!

Graeme McAusland [00:12:11] I think we've been pretty impressed at how firms have been able to respond.

Malcolm Flanders [00:12:15] Thank you, Graham. So just talking about COVID-19 again, one thing that's brought into focus is, of course, refunds. So, different plan providers have taken different approaches. If any aspect of the purchase plan can't now be met – which, as we understand, this was pretty much the case certainly over the last six, seven weeks – do you see this impacting how refunds might work in the future? So where I'm getting at is, do you think there might be stricter rules in terms of the way providers handle this, the payment mechanism side of it?

Graeme McAusland [00:12:52] I think there's a kind of inevitability about that. I'm not quite clear yet how that will pan out, but I think the message we've given on refunds is we've reverted back to treating customers fairly.

Malcolm Flanders [00:13:05] Have you had any complaints?

Graeme McAusland [00:13:07] I think we've had one. We've had a few enquiries. We've very much encouraged the customer to go back and talk to the planning provider. So they've kind of come to us, I think, in anticipation of that. And one of the things we do with complaints is say, you have to complain to plan provider first. You have to give the provider a chance to deal with it. So it's very much been, we encourage you to go and speak to the plan provider. We think they will generally be sensible. That's based on the conversations we've had with the plan providers. We think you will get a sensible response that will that will treat you reasonably. But if you have that conversation and you don't feel you've been treated reasonably, then come back to us, and we will look at it and we will look at it through a 'treating customers fairly’ lens.

Malcolm Flanders [00:14:04] Final question. We've said it a few times on this podcast or referenced “it's a time of change”. And that word "unprecedented" has been used almost daily I think in media briefings,l but COVID-19 clearly makes all that pretty obvious. With that in mind, what do you think the future looks like for funeral planning and for the FPA from your perspective?

Graeme McAusland [00:14:30] Well, I mean, clearly, we're in the midst of these very strange times, and it's kind of difficult to predict where things go from here. I guess I hope that once we come through this, whatever that means, there will be a greater recognition of the importance of the funeral industry in general and maybe the part that the funeral industry, funeral directors and planning companies have played in helping families in this situation.

Graeme McAusland [00:14:58] I know there's a lot of focus on the NHS and carers, but I know from the conversations that we're having, that funeral directors are doing a fantastic job in helping families and in the most tragic circumstances. I hope the planning companies, as we come through, will have been seen to act very responsibly.

Graeme McAusland [00:15:22] And I think that there will be a great sense of individual mortality just around people. I think people will be thinking much more about that, and that, I think for the funeral planning market, if it's done properly, I think is a genuine opportunity to help people in addressing that. I think the converse of that is if the behaviour turns poor, then it could kill the market. So I think, opportunity is the wrong word to be using in this context, but I think you can look forward and see actually the funeral planning market has a future.

Graeme McAusland [00:16:02] As for the FPA, I think we'll continue to do what we can to protect customers, in a manner that I think reflects the scale and challenges of the market. Assuming Treasury eventually implement their plans, we're going to have to respond to that. I think the most likely response is that the FPA will cease to exist. Our function will have been taken over by the FCA. So, arguing why we should be around, it's quite a toughie. But I think we live in interesting times, and I guess we'll just have to see what will happen.

Malcolm Flanders [00:16:38] Graeme, thank you. And look, you reminded me at the heart of this is the funeral director, and I echo your sentiments entirely. I think they've done an absolutely cracking job across the UK as key workers. Really heartfelt thanks for your time and for taking the trouble to talk us through the FPA and your approach and your perspective, it really is appreciated, Graeme. Thank you very much.

Graeme McAusland [00:17:04] Thank you Malcolm.

Malcolm Flanders [00:17:10] And that's all we have time for on another Partnership Podcast. You can find out more about the FPA at funeralplanningauthority.co.uk. And if this episode prompts any questions for us, let your local business manager know. I can confirm that we will shortly be communicating the next steps in respect of the agreement and how we intend to share the detail of it with you, so please look out for this as it is important. We know how busy so many of you still are throughout the pandemic, and we'll keep an eye on how the situation develops ahead of releasing future episodes. Remember, you can find all of our editions on goldencharter.buzzsprout.com, including the Trust episodes we referenced today. Stay safe and I'll talk to again on the Partnership Podcast.