There are a lot of column inches written about the Retail Distribution Review each day in the various forms of the press, but there are very few of these which are devoted to the impact on the customer.
It is widely cited that it’s good for the customer and in principle there is broad agreement to this view. The changes being driven by the Retail Distribution Review, including more transparency around charges and service as well as better qualified advisers are fundamentally steps in the right direction.
The only problem might be that we haven’t really told the customer about it.
So what in practice will the customer see that’s different from their advised relationship today? For starters some of them will be faced with the prospect of paying a fee for advice. Paying a substantial sum up front for most things is hard, but when you’re doing it for something which is pretty much intangible, it becomes even harder. Particularly where previously the price has been hidden and it felt like you were getting it for ‘free’. We have a long standing tradition in this country of not paying fees for financial services products. When people pay cash, they normally expect something back in return.
So the advice sector needs to up its game in terms of the service that it provides. It needs to not just charge like a professional but also ensure that it provides additional tangible services like a professional.
Good quality, tangible customer reports become important, both pre & post ‘sale’, as do comprehensive web sites, providing customer access to their portfolio/products. Reviews with clients need to be carried out in a timely fashion, and most importantly firms need to focus on great communication, starting at the beginning when the adviser tells the customer exactly what services they will be getting.
If a firm focuses on these key outputs, as a customer I suddenly feel involved in the process and that I’m being treated like a valued asset. I will feel more assured about paying up front for this service as I can see what services I’m being provided. Even though I’ve probably never heard of the Retail Distribution Review I’m seeing my adviser behave differently.
Unfortunately at the same time they’ll be plenty of customers who will wonder why their adviser never contacts them directly. Without realising they have been ‘segmented’ put, most likely, into a pot with other customers labelled ‘not valuable enough’. For these customers the relationship with intermediation may remain at arms length, but in truth will they see much difference?
Most of us have any number of financial services relationships. For myself I stopped counting at ten relationships with different financial institutions. What we have become is discerning consumers, even in the mass market area which means the impact of one of these, the financial adviser not getting in touch will not be disastrous.
Therefore the impact of the Retail Distribution Review will vary depending on who you are. For those individuals considered wealthy and profitable enough, they will probably see an increase in the number and quality of the interactions from their adviser as they try to retain their business. For those clients that have been relegated to almost orphan status, they will probably be serviced only when they go to the intermediary to look for it – but this is probably not much different to what they’ve come to expect. However this latter group may find themselves the target of other financial services players as banks and product providers aim to distribute products directly. Even if I have probably never heard of the Retail Distribution Review, it’s making a difference to me as to how I’m being treated as a customer.
Martin McKenna - 1
st July 2010