Kim North: Advice market regulation needs to go back to basics

Kim North

When it comes to setting up your stall to sell products or services, the “seven Ps” of marketing should always be followed. These are: price, promotion, people, physical environment, process, product and place.

The stalls of the pension policymakers do not appear to be taking these principles into account. Take, for example, the idea of secondary annuities, which was first mentioned in March 2015 by then-chancellor George Osborne as part of the pension freedoms.

The government confirmed the plans would go ahead in April. But last week it scrapped the idea altogether citing “the consumer protections required could undermine the market’s development”.

In this case, little regard was given to the physical environment principle. If detailed analysis was undertaken early on about what would actually happen when the annuity freedoms were launched, this U-turn would never have occurred.

As the FCA encourages us all to innovate and join free from reprisal in sandboxes, I feel sorry for those who tried to do so in the secondary annuity space. Who can blame them for forging ahead as secondary legislation was written and published.

It is hard enough to be innovative while keeping compliant to the FCA’s conduct of business rules that have become more prescriptive year by year, let alone having to guess if announced changes are going to go ahead.

Meanwhile, the marketing principles for guidance provided by Pension Wise could have given more regard to the product point. A recent survey found half the customers that make an appointment with the organisation do so to get a specific recommendation on what to do with their pension pot, despite this being outside its remit.

So while we wait for the Government to replace the statutory guidance providers I urge the powers that be to take the seven Ps into account – before millions more pounds go down the drain.

Consumers want product advice at a small price (say, £150) and delivered in a way that suits them, such as Skype, by good, technical, polite people. And why do I suggest a price? Well, marketing experts know that, when a price is attached to something, it becomes an important decision and more time and care is provided searching for value.

As Warren Buffet once said “price is what you pay; value is what you get”. I have always thought free advice devalues any promotion. A tiered advice service is needed: product advice paid for, debt and guidance free.

The service should be controlled with the early adoption of the Mifid II requirement to record telephone and online calls. Advisers are found to be more compliant when having to record calls and online messaging (no surprise there) and consumers cannot run to the ombudsman saying they were not told an important fact about investing.

Many technology firms have the recording kits all ready to launch; some of which is very impressive. The seven Ps and great technology is a sure fire way to business success.

Kim North is managing director at Technology & Technical