We recently hosted our spring symposium focusing on the journey from the RDR to the Financial Advice Market Review and providing consumers with a voice via technology, product and service design. Our research found five key areas that act as barriers to consumer engagement but which should be viewed as opportunities by the financial services industry:
Consumers need tailored information, guidance and advice to help them make more informed decisions with their finances. They are digitally savvy and prime for the new financial technology tools beginning to populate service propositions. But the industry still has much to do to provide the clear and simple information and advice consumers need to feel confident they can make these choices.
There is no doubt consumers will defer to authority when it comes to investment choices. The public prize a firm that espouses professional prowess and employs skilful and engaged staff. The RDR has only completed half the job, with a focus on individual professional development. We require businesses to become true professional service firms that showcase a commercial savviness for managing all departments around a client-centric approach.
Easy access and flexibility
For firms to answer the “what is in it for me?” question consumers tend to ask, they need to make products and services easy to access, and build in flexibility. There are
a couple of important issues here:
1. Saliency: Products and services need to be designed around the client journey. By catering to personal propensities, the industry will ensure a high engagement for savings and investments, and a move away from debt.
Our favourite behavioural economics example is known as the “Ikea effect” or “endowment theory”. People value something more if they feel they own it. Think about all the Ikea cupboards you may have built: there is a sense of satisfaction that there is a piece of you in it compared with if it was bought off the shelf.
2. Features and benefits: The flexibility of the new Isas, the fact it should now (in theory) be easier to transfer your bank accounts and platform re-registration all show the industry is developing reflexive features and benefits to meet client needs. Yet there is still a lot of hard work to be done. If a pension savings plan could also allow access to pay down student loans, for example, then we have something highly desirable that will engage not deter.
Value for money
Without perceived value and salient outcomes consumers will not be interested in paying for advice or buying into direct offerings. There are five key areas of note here:
Discretion: As we move into the digital age clients want discretion to receive information, guidance and advice in different ways.
Choice: Wealth managers, IFAs and banks need to work on developing professional service propositions that offer tangible benefits.
Fungibility: Open market options, pension transfer flexibility and the need to plan for long-term care all mean savers need flexible options to transfer assets dependent on their life stage.
Behavioural coaching: Emotional insurance is required to ensure clients stay in their seats during volatile times. Those advisers that offer consultative meeting skills are best placed to manage such emotion and show the value of their strategies. Managing the insistent client is a classic example.
Safety: Human beings are risk- adverse, so a well structured and robust risk assessment process is crucial to provide confidence in the proposition due diligence.
If consumers’ interests are incor-porated into product and service design, and they are represented fairly and accurately, this would heighten their engagement with the industry. According to FCA strategy manager Alex Roy, who presented at the event, by making sure there is a balance between the regulatory stick and carrot we can begin to ensure the industry truly incorporates know your client and treating customer fairly principles into their propositions and services.
The FCA could do more but hopefully the regulatory sandbox will offer a safe harbour for all stakeholders to engage with cons-umer voices across our five themes.
Chris Davies is managing director at Engage Insight