Financial Services Intermediation - a really retail business?
The challenges over how the Intermediary finds the time to deliver the sales service are well documented, and I don’t intend to go over that old ground here. But there are a number of important comparisons that can be made with other parts of the retail industry, who are able to promote and sell their goods, products and services in a very different way.
If I walk into a big retail supermarket, trolley in front of me, with the aim of it not taking too long, I already know certain things about the whole experience. I know that I will buy certain products that I want and I also know that I will no doubt buy others that I hadn’t planned to. This will be because I walked into the store and will have dedicated time to fulfilling this basic need of avoiding starvation. I am educated constantly via the TV, billboards and papers about this store, what the experience will be like and the type of products I can expect to see.
Behind the scenes the retail supermarket bosses will have costed every penny on every product. They will know their overheads exactly and understand the extent of the margins by product. They react quickly to the market and to what they believe the market wants as they ensure ‘the sale of goods to the ultimate consumers’ to quote the dictionary definition of ‘retail’.
And indeed advisers of all types in distribution, from the independent to the tied and multi-tied are fulfilling that need for the ‘ultimate consumer’.
But how many intermediary firms can genuinely say that they know in detail how their business is costed, what return they get from any promotion and marketing, and what plans they have to react quickly to their market?
So how really retail is the financial services Intermediary?
Like with most requirements, people know they need to do something, but often don’t know what the products they are buying really are, or equally as important, what the processes involved in purchasing these products actually are.
The PR & Advertising circus that revolves around the retail industry is strangely absent when it comes to financial services. As the Retail Distribution Review nobly attempts to raise the education of the adviser, and in particular that of the independent adviser, what are the FSA and the industry really doing to ensure that the knowledge of the consumers is as high as it can be?
The more comfortable the consumer is around their buying environment, the more they will buy, not only of what they thought they wanted, but also what they have realised they need. Generally even today people still don’t like to be ‘sold to’ and would like to be more comfortable in their buying process. The next generation of consumers will use the web to look at financial products and therefore can become even more removed from the expertise of a qualified adviser. What they all really want is to go around a financial services supermarket with their trolleys.
The challenge to the financial services industry right now is to be confident that it does a good job and therefore be prepared to invest in itself, promote what it does and how it does it. Good advice is a service worth shouting about.
After all, if the government wants to do something about the pensions gap, the savings gap and the protection gap it will need this impetus from the financial services market. With the Retail Distribution Review on its way, and the advent of new initiatives such as auto-enrolment, perhaps now is the time to promote an ever increasingly competent and important retail service to the public.
Martin McKenna - 18th February 2010