Lookers COO tells how the group is reviewing its motor finance sales processes

Motor finance is under scrutiny as never before. In March, the Financial Conduct Authority (FCA) said it planned to investigate Lookers’ sales processes between the period 1 January 2016 to 13 June 2019. The announcement attracted a huge amount of attention from motor dealers who want to see what the FCA will discover in its investigation and what financial penalties – if any – are imposed on the group as a result.

Nigel McMinn, COO at Lookers told Motor Trader: “They have said they would like to look deeper to check if there have been any widespread systemic customer detriments. That process has not started. We have been written to say they will come and take a deeper look but we have not even got out of the blocks with that one yet.”

Running in parallel with this is the review Lookers is carrying out into its regulated affairs, which it is sharing with the FCA. This is also of huge interest to dealers because it gives a clear idea of where the market is going when it comes to regulating motor finance.

Lookers reviews motor finance

The numbers are big. Lookers is to invest £10m in 2019 and 2020 to improve controls in its sales processes. During 2018 the UK’s third largest dealer group became aware of improvements that needed to be made.

In December last year it commissioned an independent review of the group’s internal control, risk assurance systems and internal audit and shared the results with the FCA.

“This review indicated that there were some control issues in the sales process in the group’s regulated activities which would require an improvement plan to be implemented,” Lookers announced to shareholders.

We asked lookers COO Nigel McMinn to spell out what the company is doing. First up is the overhaul of its sales processes, which it wants to simplify to the benefit of customers and staff alike.

Sales processes

For McMinn, selling motor finance has become more complicated as products have become more regulated. He said it is time to simplify systems and reduce the risk of errors.

“Like most motor retailers we have taken an existing sales process and as products have become more regulated we have layered on statements of demand and need, initial disclosure documents, terms of reference, all sorts of disclaimers for different products.

“We have layered it on top of existing sales process and at its worse, depending on which product you take, you could be signing 26 different times. And course there is scope within that for people to make mistakes.

“We are using this as an opportunity to simplify the whole process. It is still highly compliant, it still starts with asking the customer about their preferences for the way they fund the vehicle to determine the sort of insurance products they would be eligible for. But it then makes the whole thing much simpler and more streamlined from there.

“We present them with the right products, the right choices and keep it compliant with the minimum of signatures and admin. We think by the end of this year or beginning of next year we will have that number of signatures down to about seven,” he said.

This, said McMinn, is not just good for customers but staff, too.

“This is going to make things a lot slicker for our people and it should be less time consuming. Rather than sitting for a few hours going through paperwork, we think we can take at least half the time away. It is much better for the customer.

“There will definitely be some improved presentations of products. It will make sure two different types of finance products are presented so the customers can consider alternatives, the things we can build in to force the compliance. Its essence is to make it simpler.”

Big investment in training programme

Lookers is also spending a lot of money on training, which is being carried out by an external agency, inevitably a costly exercise when you have to train 2,500 staff over a short period.

“One of the things that made it a short term one-off costly exercise is producing a new process and new way of doing things, so we are focused on doing the right thing for the customer. In doing that you have to do it over a fairly short period of time. We are talking about training 2,500 people in just over a month,” he said.

McMinn said the company could not have carried out the work in house. There were too many people to be trained in a relatively short period. It is face-to-face training over one or two days so it is intensive.

Risk management and quality assurance

Lookers also said it is looking at risk management and quality assurance and keeping the FCA in the loop on its findings.

“We always have an ongoing dialogue with the FCA. We are sharing all of this with them as we are doing it. This is part of the ongoing open and transparent dialogue. It is a healthy thing to have the FCA involved in your business and constantly telling them about what you are doing. It is a good thing.”

I asked McMinn to give some detail on the changes it is making to its computer systems to cater or the new motor finance regime. McMinn points out that Lookers is not alone. Dealers are looking on as they, too, assess what they have to do.

“It does not surprise me that there is huge interest. We were one of the many dealers in the industry that didn’t know what we didn’t know. We thought we were at the compliant end of the spectrum. Many others will be saying ‘Will we have to do the same thing as ourselves?’ I think it would be responsible for any dealer in the sector to bring in expertise, whether that is consultancy or in house compliance people to really properly check whether they are all over this stuff as well,” he said.

Changes to IT systems

On the systems front, Lookers is bringing expertise in house to give it greater control over its business.

“On the systems side of things, that is largely based around Fast Track, the sales, showroom system that we use. We have now bought the source code for that so we can make whatever changes we want to it.
It is not a shared piece of software that other dealers will use. We are free to do whatever we want with the software and that enables us to really power forward.

“We have project managers and a team of people who use that code and part of the agenda is to integrate that with the new website that we have launched successfully. So we are now in control of our own website, the starting point for the journey for most customers and the showroom system so we can join the two together as one digital, omni-channel experience. We can now design the whole experience whereas a year ago we would have had a GForces website and a third party supplier for the showroom system with limited scope to change anything.”

By switching from GForces Lookers has however lost the advantage offered by the new NetDirector Auto-e platform, which offers ecommerce, which is becoming more important for used car retailers.

“The next generation of development, aside from the whole simplification and streamlining agenda that we have spoken about, will be to build in reserving a car, paying a deposit, processing the finance online and ultimately arranging a delivery date so you could do the whole thing online. We want to do that in a way that is integrated into our core system. But we are not rushing to produce an online solution,” he said.

I said to McMinn that there was a lot of interest in the developments with the FCA. Did he feel that Lookers had been singled out?

“I do not think we have been singled out. A lot of companies are in dialogue. The FCA has made no secret of the fact it is looking heavily into our sector and they want to see professional standards of regulation and compliance more akin to a bank or insurance company,” he said.

And finally, I asked McMinn is the FCA objecting to the amount of money dealers are making out of finance? “That is certainly not part of the dialogue we are having with them,” he said.