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Mother of invention
Until Mary Quant invented the mini-skirt, nobody knew we wanted it.
Most people in most industries tend to assume that what exists is all that people want - if people wanted something else, someone would already have invented it.
As consumers, we know this is not true. But as producers (fund managers, life companies) and distributors (advisers), we are as guilty as anyone else of assuming that the status quo is OK and find it hard to envisage new products that do things differently. The main reason is the human default settings of laziness and inertia.
Consumers do not know what they want until they get it. Nobody had any idea about iPhone apps until people started to make them.
But when people get it, they really get it. Most consumer products, especially gadgets and clothes, exemplify a relentless sequence of innovations, most of which die and a few that are taken up with wild enthusiasm.
Not so financial services. Why do so many financial services companies manufacture so many dull, me-too, poor-value clones of existing products? Why is genuine innovation so rare? Why do consumers put up with this rubbish?
Let’s not blame consumers. They do not understand financial products and do not want to - it gives them headaches.
They want buy-and-forget solutions to tiresome financial problems and their eyes glaze over at technical details.
It is the product providers who are guilty. What proportion of financial services companies’ revenues do you think are spent on research and development?
For most life companies, R&D seems to consist of reading another company’s product brochure. But for providers, doomsday is approaching. Most financial products are weightless and nearly costless if manufactured and distributed using Web 2.0 technology.
As one big thinker on the internet has said, if the marginal cost of production is zero, there is only one way the price (for which read profit margin) can go - towards zero.
Most financial products are not really products at all - that is just the manufacturer’s perspective, a desperate attempt to prevent people understanding that most are commodities and should be cheaper by a factor of 10.
Forget product-pushing technology designed by providers. It is intermediaries and advisers who need to be the innovators because what people really need is technology to understand how saving and investing and borrowing work rather than regarding the money world as a casino run by bent croupiers or a magical creation of big men in the City.
The innovation that makes it possible for advisers and consumers to take control is next-generation wrap accounts or superwraps.
They need to become mainstream, and I expect them to, because there is some real consumer-friendly innovation coming along, and one - allmyplans.com - could even be revolutionary.
Allmyplans empowers individuals to control what information they enter is shared with their IFA. So here is an answer to the adviser’s personal data management bugbear - the client does most of the data entry.
The fact that the client can transfer the agencies for any products held on the system at the click of a mouse means that only advisers who are very confident of their service proposition will want to get up and dance.
But it is a great opportunity to redefine the adviser-client relationship on a grown-up basis and will probably get my vote as innovation of the year.
Chris Gilchrist is director of Churchill Investments and editor of The IRS Report
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