There is no shortage of evidence about how consumers will behave in a range of different circumstances, yet more often than not organisations seem to reach conclusions based on what the individuals within them would do themselves, rather than how an outsider might react. I offer two simple examples: the range of funds being offered to members of group schemes, and the adviser’s attitude to giving customers access to financial planning tools.
Hardly a week goes by without the announcement of the pending launch of a new corporate wrap service, an existing wrap provider looking to enter the corporate market or a new group Sipp product. Hundreds of millions of pounds is being spent on new services of this type. Yet we all know that the vast majority of scheme members will opt for the default option. This can be reinforced by the fact that a major study in the US involving no fewer than 800,000 potential pension scheme members found that for every 10 extra funds offered to a scheme member, 2 per cent fewer people joined the scheme.
It is fair to say that most people who work in this industry are engrossed by the subject. Financial advisers tend to be passionate about the benefits their services can bring to consumers. Back in the real world very few of our clients share the same passion. Yes they want their investments to perform well but they don’t want to spend too much time thinking about it. If we offer scheme members, who for the most part will not benefit from individual advice, complex open architecture options, are we not just making it more difficult for them to choose? In practice this may mean they choose to do nothing.
At the same time as most providers are making their products more complex, services are emerging that will help consumers more readily understand their financial options and objectives. More and more insurers are building financial planning tools into their group scheme proposition. But large numbers of advisers I come across are very resistant to the idea of clients having access to these for fear they may make the advisers job look easy and undermine the IFA’s part in the process. The current regulatory focus also seems directed towards precluding providers from supplying such services for adviser firms to use.
As product manufacturers are creating increasingly complex offerings for clients, is it not more important than ever to get the client engaged with their financial plans? Using financial planning tools with the client to create with them a financial plan or objectives makes it possible for the client to become intimately involved in the process. This can become, if you like, a mental “foot in the door”. However much you may talk to a client about how their investments might perform in different circumstances working with them, using software to build their own financial plan has the potential to engineer a far more significant level of engagement from the member. I believe such tools should be embraced not resisted. There is a wealth of scientific evidence around persuasion which demonstrates the benefits of getting customers to engage in this way.
Let me be clear, I am not saying that it is not important to develop new services giving customers wider choice, but the way in which we present these offerings needs to reflect the way customers behave, not the way we, as an industry, would like them to behave. Technology delivers the mechanism to finely hone these services to support consumer behaviour; any organisations failing to take such trends into account are likely to find themselves owning some very large white elephants.
The current proposals to limit the provision of financial planning tools to advisers under the inducements rules could severely conflict with the regulator’s objective to help consumers achieve better outcomes. If the rest of the industry is thinking like experts rather than consumers, we cannot be too surprised if the regulator makes the same mistake.
There is no shortage of evidence about how consumers will behave in a range of different circumstances, yet more often than not organisations seem to reach conclusions based on what the individuals within them would do themselves, rather than how an outsider might react. I offer two simple examples: the range of funds being offered to members of group schemes, and the adviser’s attitude to giving customers access to financial planning tools.
Hardly a week goes by without the announcement of the pending launch of a new corporate wrap service, an existing wrap provider looking to enter the corporate market or a new group Sipp product. Hundreds of millions of pounds is being spent on new services of this type. Yet we all know that the vast majority of scheme members will opt for the default option. This can be reinforced by the fact that a major study in the US involving no fewer than 800,000 potential pension scheme members found that for every 10 extra funds offered to a scheme member, 2 per cent fewer people joined the scheme.
It is fair to say that most people who work in this industry are engrossed by the subject. Financial advisers tend to be passionate about the benefits their services can bring to consumers. Back in the real world very few of our clients share the same passion. Yes they want their investments to perform well but they don’t want to spend too much time thinking about it. If we offer scheme members, who for the most part will not benefit from individual advice, complex open architecture options, are we not just making it more difficult for them to choose? In practice this may mean they choose to do nothing.
At the same time as most providers are making their products more complex, services are emerging that will help consumers more readily understand their financial options and objectives. More and more insurers are building financial planning tools into their group scheme proposition. But large numbers of advisers I come across are very resistant to the idea of clients having access to these for fear they may make the advisers job look easy and undermine the IFA’s part in the process. The current regulatory focus also seems directed towards precluding providers from supplying such services for adviser firms to use.
As product manufacturers are creating increasingly complex offerings for clients, is it not more important than ever to get the client engaged with their financial plans? Using financial planning tools with the client to create with them a financial plan or objectives makes it possible for the client to become intimately involved in the process. This can become, if you like, a mental “foot in the door”. However much you may talk to a client about how their investments might perform in different circumstances working with them, using software to build their own financial plan has the potential to engineer a far more significant level of engagement from the member. I believe such tools should be embraced not resisted. There is a wealth of scientific evidence around persuasion which demonstrates the benefits of getting customers to engage in this way.
Let me be clear, I am not saying that it is not important to develop new services giving customers wider choice, but the way in which we present these offerings needs to reflect the way customers behave, not the way we, as an industry, would like them to behave. Technology delivers the mechanism to finely hone these services to support consumer behaviour; any organisations failing to take such trends into account are likely to find themselves owning some very large white elephants.
The current proposals to limit the provision of financial planning tools to advisers under the inducements rules could severely conflict with the regulator’s objective to help consumers achieve better outcomes. If the rest of the industry is thinking like experts rather than consumers, we cannot be too surprised if the regulator makes the same mistake.
There is no shortage of evidence about how consumers will behave in a range of different circumstances, yet more often than not organisations seem to reach conclusions based on what the individuals within them would do themselves, rather than how an outsider might react. I offer two simple examples: the range of funds being offered to members of group schemes, and the adviser’s attitude to giving customers access to financial planning tools.
Hardly a week goes by without the announcement of the pending launch of a new corporate wrap service, an existing wrap provider looking to enter the corporate market or a new group Sipp product. Hundreds of millions of pounds is being spent on new services of this type. Yet we all know that the vast majority of scheme members will opt for the default option. This can be reinforced by the fact that a major study in the US involving no fewer than 800,000 potential pension scheme members found that for every 10 extra funds offered to a scheme member, 2 per cent fewer people joined the scheme.
It is fair to say that most people who work in this industry are engrossed by the subject. Financial advisers tend to be passionate about the benefits their services can bring to consumers. Back in the real world very few of our clients share the same passion. Yes they want their investments to perform well but they don’t want to spend too much time thinking about it. If we offer scheme members, who for the most part will not benefit from individual advice, complex open architecture options, are we not just making it more difficult for them to choose? In practice this may mean they choose to do nothing.
At the same time as most providers are making their products more complex, services are emerging that will help consumers more readily understand their financial options and objectives. More and more insurers are building financial planning tools into their group scheme proposition. But large numbers of advisers I come across are very resistant to the idea of clients having access to these for fear they may make the advisers job look easy and undermine the IFA’s part in the process. The current regulatory focus also seems directed towards precluding providers from supplying such services for adviser firms to use.
As product manufacturers are creating increasingly complex offerings for clients, is it not more important than ever to get the client engaged with their financial plans? Using financial planning tools with the client to create with them a financial plan or objectives makes it possible for the client to become intimately involved in the process. This can become, if you like, a mental “foot in the door”. However much you may talk to a client about how their investments might perform in different circumstances working with them, using software to build their own financial plan has the potential to engineer a far more significant level of engagement from the member. I believe such tools should be embraced not resisted. There is a wealth of scientific evidence around persuasion which demonstrates the benefits of getting customers to engage in this way.
Let me be clear, I am not saying that it is not important to develop new services giving customers wider choice, but the way in which we present these offerings needs to reflect the way customers behave, not the way we, as an industry, would like them to behave. Technology delivers the mechanism to finely hone these services to support consumer behaviour; any organisations failing to take such trends into account are likely to find themselves owning some very large white elephants.
The current proposals to limit the provision of financial planning tools to advisers under the inducements rules could severely conflict with the regulator’s objective to help consumers achieve better outcomes. If the rest of the industry is thinking like experts rather than consumers, we cannot be too surprised if the regulator makes the same mistake.
There is no shortage of evidence about how consumers will behave in a range of different circumstances, yet more often than not organisations seem to reach conclusions based on what the individuals within them would do themselves, rather than how an outsider might react. I offer two simple examples: the range of funds being offered to members of group schemes, and the adviser’s attitude to giving customers access to financial planning tools.
Hardly a week goes by without the announcement of the pending launch of a new corporate wrap service, an existing wrap provider looking to enter the corporate market or a new group Sipp product. Hundreds of millions of pounds is being spent on new services of this type. Yet we all know that the vast majority of scheme members will opt for the default option. This can be reinforced by the fact that a major study in the US involving no fewer than 800,000 potential pension scheme members found that for every 10 extra funds offered to a scheme member, 2 per cent fewer people joined the scheme.
It is fair to say that most people who work in this industry are engrossed by the subject. Financial advisers tend to be passionate about the benefits their services can bring to consumers. Back in the real world very few of our clients share the same passion. Yes they want their investments to perform well but they don’t want to spend too much time thinking about it. If we offer scheme members, who for the most part will not benefit from individual advice, complex open architecture options, are we not just making it more difficult for them to choose? In practice this may mean they choose to do nothing.
At the same time as most providers are making their products more complex, services are emerging that will help consumers more readily understand their financial options and objectives. More and more insurers are building financial planning tools into their group scheme proposition. But large numbers of advisers I come across are very resistant to the idea of clients having access to these for fear they may make the advisers job look easy and undermine the IFA’s part in the process. The current regulatory focus also seems directed towards precluding providers from supplying such services for adviser firms to use.
As product manufacturers are creating increasingly complex offerings for clients, is it not more important than ever to get the client engaged with their financial plans? Using financial planning tools with the client to create with them a financial plan or objectives makes it possible for the client to become intimately involved in the process. This can become, if you like, a mental “foot in the door”. However much you may talk to a client about how their investments might perform in different circumstances working with them, using software to build their own financial plan has the potential to engineer a far more significant level of engagement from the member. I believe such tools should be embraced not resisted. There is a wealth of scientific evidence around persuasion which demonstrates the benefits of getting customers to engage in this way.
Let me be clear, I am not saying that it is not important to develop new services giving customers wider choice, but the way in which we present these offerings needs to reflect the way customers behave, not the way we, as an industry, would like them to behave. Technology delivers the mechanism to finely hone these services to support consumer behaviour; any organisations failing to take such trends into account are likely to find themselves owning some very large white elephants.
The current proposals to limit the provision of financial planning tools to advisers under the inducements rules could severely conflict with the regulator’s objective to help consumers achieve better outcomes. If the rest of the industry is thinking like experts rather than consumers, we cannot be too surprised if the regulator makes the same mistake.
