Which are more out of touch with consumers: the actuaries or the techies?

For as long as I’ve been involved with financial services, it has been a truth universally acknowledged that actuaries don’t know anything about consumers.  And, arising from this undeniable fact, that financial services firms led by actuaries (if the idea of actuarial leadership isn’t too much of an oxymoron) are bound to be as out of touch with consumers as it’s possible to be.

But increasingly, I wonder whether this is still true.  No, don’t get me wrong, I’m not suggesting that actuaries have acquired any capability for consumer insight, or any other kind of emotional intelligence.  But I am wondering whether there is now a new generation of financial services business leaders, with completely different professional skills, who are even less well equipped to enable their firms to identify and satisfy consumer wants and needs.

Who are these people and what is their skill?  They are the techies, and across countless numbers of fintech start-ups t heir skill is doing brilliantly innovative and complicated things with digital processes that in one way or another will transform people’s financial lives.

If, that is, the people in question a) want their financial lives to be transformed, and b) are able to grapple with what’s required of them to achieve the transformation.

This is not some Luddite yearning for things to stay as they are, or indeed to go back to the way they were in the quill pen era.  But it is a fairly strong suspicion that quite a lot of the very clever new services now on offer are simply too complicated, too demanding and require too much engagement for most of us to enjoy the benefits they offer.

Probably the best example is the whole subject of financial aggregation, a big theme than comes in many flavours.  Once we bring all our finances together and start managing them as a whole, all sorts of good things become possible.  We can “optimise” our financial lives in ways we never could when everything was all over the place.  But will we?  Do we really care?  Are most of us not more likely to stick with the principle of “satisficing” – that great word invented by that great US Economist Herbert Simon to describe the way we’re willing to put time and effort into solving a problem until, and only until, we find a solution that we decide is satisfactory:  as soon as we do, we’ll stop right there, even if further work would have led us to even better solutions.

Techies have an infinite capacity to engage with technology, just as actuaries have an infinite capacity to engage with financial systems.  These exceptional levels of engagement are what make these people important, special and valuable.  But when it comes to designing and developing things intended for ordinary, unengaged consumers, they’re also what makes them very dangerous.  .

Hmm. Have I been wrong about the power of words for all these years?

As a writer, I’ve never felt too much doubt about the power of words over the years.  Of course you have to choose the right words, and specifically the words that will convey what you want to convey to your intended readers, which isn’t easy.  But if you can do that, it’s always seemed to me, words won’t let you (or your readers) down.

However, I have in front of me a document which does rather challenge this assumption.  It’s a 48-page A5 booklet from the guidance service PensionWise titled “Your pension:  it’s time to choose” , and one of its intended pre-retirement age readers is in fact me.

And I can’t get any sense out of it at all.  In fact, I can’t be bothered to read beyond about page 8 or so.

This is partly because the writing style is very boring – flat, dull, colourless, utterly lacking in life.  But it’s more for another reason:  it’s just words. (Well, and a few numbers.)  There’s one font and, as far as I can see, three point sizes, and apart from some tinted text panels and tables that’s all there is for 48 pages.  No graphics, no pictures, no graphs or charts, no signposts (except the front cover, which does literally show a picture of a signpost) and obviously as a printed booklet no video, audio or music.

What I’ve discovered is that today, you just can’t communicate a subject as detailed, lengthy and boring as this when the only tools in your communications toolbox are one font, three point sizes, some tinted panels and something between 15 and 20,000 words.  Yes, the subject is important, and yes it’s of personal interest.  But, even so, it’s just too boring.

And if I’m saying that, as an avid reader and as someone whose understanding of pensions (though pitiful by expert standards) is at least ten times better than average, then so are an awful lot of other people.

So, note to self:  you just can’t communicate with nothing but words any more.  Which, a million or so words into this blog, must be a worry.

 

Book response update: what we used to call “encouraging progress”

Early in my financial marketing career, I did quite a lot of ads communicating companies’ financial results.  This was lucrative work for the agency, but desperately dreary for the poor sods actually doing the work.  Among the investment community targeted by this advertising, there was a recognised short list of coded expressions that were understood to convey precise and surprisingly detailed messages about the performance of the companies in question.  “Poised for growth” meant “still losing money”,  “strengthening the management team” meant “firing the CEO for underperformance”,”  “steady progress” meant “dead in the water”, and so forth.  It wasn’t necessary, or indeed useful, to try to come up with new or different forms of words:  the aim was simply to choose the existing option which fitted the facts most accurately.  (There’s probably an algorithm that does this these days.)

Perhaps the phrase we dialled in most often was the one in this blog’s headline, “encouraging progress.”  This was about the blandest message available, the beigest colour in the colour palette,  It meant things weren’t going too badly, but nor were they going all that well.  You wouldn’t want to sell your shares in a panic, but you wouldn’t be queuing to buy more.

That all seems to fit pretty well with the tenor of this report on my last post, in which I urged the FS marketing community to respond more vigorously to my book on the subject, No Small Change, co-written with leading challenger banker Anthony Thomson.  In response, the following things have happened:

  • The book shot back up to about #10,000 on Amazon, although I have to admit that it has now shot back down again to about #300,000.
  • It has now gathered a total of six Amazon reviews, and although that doesn’t compare too well with, say, the 2,000 or so received by The da Vinci Code, ours average out at 4.8 stars and Dan Brown’s only just over 4 (which I to say I think is absurdly generous).
  • One estimable client has not only read it, but has also sent me a copy of his written critique, to be circulated among his team, which includes, for goodness sake, no fewer than 93 bullet points (the large majority of them positive).
  • Another estimable client has also read it, and, perhaps even more admirably, invited me to discuss it over lunch.

That’s about it, and writing it all down like this I do wonder whether “encouraging” progress might be pushing it a bit.  As I recall, the next level down was “solid” progress – perhaps that captures it better.

Come on, FS marketers, let’s be ‘avin you.

It seems to have been an obscure American humorist called Olin Miller (not Mark Twain, or Eleanor Roosevelt, or any other of the usual famous-quote suspects, and definitely not Delia Smith) who first  made that mildly deflating comment, “You’d worry a lot less about what other people think of you if you realised how seldom they do.”  We don’t know much about Mr Miller, or the circumstances in which he made the remark, but I wouldn’t be surprised to find he’d recently published a book about financial services marketing.

When my co-author Anthony Thomson and I published No Small Change:  Why Financial Services Needs a New Kind Of Marketing a couple of months ago, we didn’t imagine we’d be rivalling Dan Brown and JK Rowling at the top of the best seller charts.  But, to be honest, having included some original and quite controversial ideas, some harsh and probably unfair criticisms, some surprising new market research findings and some reflections from the individual who is now the UK’s, probably Europe’s and now arguably the world’s leading challenger banker (Anthony, obvs, not me), ,I think we have been a tad surprised by the near-complete silence that has greeted us.

One of the more important ideas in the book is that marketers can never blame their target markets for not getting what they have to offer or hearing what they have to say.  If the target market doesn’t get it or hear it, by definition it’s the marketers’ fault.  Exactly the same is true of authors.  By definition, if people don’t know of the book, or if they do but can’t make any sense of it, then it’s our fault (and maybe also a little bit our publishers and our PR people).

But even so, it’s not quite that simple.  We do know that a lot of our friends, clients and contacts have bought it – after all, we signed several hundred copies at our various launch events – and even if most just bought copies to be nice and show support, there must have been some who intended to read it, or at least part of it.

And yet we’ve only had four reviews on Amazon, and while they are all perfectly genuine reviews from real people who’ve read the book, three of the four did result from email exchanges in which we said how grateful we’d be if the individuals concerned could write up some of the nice things they had to say.  And of course it’s a mixed blessing that all four of the reviews all give us five stars – hasn’t anyone managed to find anything they’re upset about (not even at Barclays)?

I don’t think I’m going to say any more on this subject, because I can feel that I’m on the brink of blaming my readers and that really is a cardinal sin.  But encouraging my readers is OK – so, come on, chaps and chapesses,let’s be aving you – there’s still plenty of time to say something, appreciative, or indeed otherwise.

Making sense of the Moola deal. Or trying to.

Last week we heard news of the latest, though undoubtedly not the last, acquisition of a sprightly young fintech by a cash-and-customer-rich sugar daddy – this time the fintech being robo-adviser Moola, and the daddy being benefits firm JLT.  The stated rationale, which you’ve probably deduced from the identities of the firms, is that everyone’ll win from the introduction of Moola onto JLT’s Benpal (terrible name!) benefits platform. Employees get a new savings and investment option, Moola gets a cheap source of lots of new customers, JLT gets an incremental business stream and I suppose if I was being cynical I’d say that if employees can be steered into Moola rather than increasing their pension contributions, employers might get a welcome reduction in their contribution-matching bill.

What’s not at all clear to me is whether all this is going to work, and if so on what kind of scale.  It comes down – as it has in quite a few other recent blogs – to the question about the level of appetite that exists out there among the public at large for simple, accessible, fairly low-cost investment schemes.  As my regular reader knows very well, I’ve always been massively sceptical about this – and my scepticism hits new heights in the context of an employee benefits platform, where the option most people really should take. increasing their pension contributions, is right there under their noses alongside the non-pension option.

What I think the acquisition does tell us is that up to now, Moola has been struggling to recruit customers at an affordable cost.  (In fact, we knew this already, partly because all robo-advisers are struggling to recruit customers at affordable cost, but also because Moola rather gave the game away with a desperate-looking promotion back in the Spring, offering new investors a whopping 10% cashback after a year.  Canny investment hobbyists immediately took to the message boards encouraging each other to buy in for exactly 366 days and then promptly walk away to grab the best offer on the market in Spring 2019.)  But whether appearing as an option on JLT’s Benpal platform will really change their customer acquisition prospects can’t yet be clear.

Wearing my ever-present sceptical hat, I’d say those prospects aren’t great.  As for whether the parties to the deal would agree with me, I don’t suppose we’ll ever know – or at least, not unless or until JLT chooses to tell us what they paid.

Asset management: the race to be different is on

Over the years, there have been few easier ways to make money than asset management.  It’s not just at the rocket-science, hedge fund end of the market:  for decades, a combination of high and opaque charges, unaware and largely inert customers, uncritical and often conflicted intermediaries and an absence of serious external scrutiny kept the most vanilla of fund managers (of whom there are many) well supplied with six-figure bonuses and top-of-the-range Mercs and Range Rovers.

Perhaps more importantly, these same factors have also combined to keep the market ridiculously overcrowded and undifferentiated.  When you can still make a ton of money running small funds that are exactly the same as everyone else’s and perform no better or indeed rather worse, there are few if any pressures to make the industry more competitive.

Now, though, that’s all changing in the retail market at least, and the active fund management industry is feeling the first stirrings of panic.  Among a long list of things all happening at once, the three most important are:
1.  The somewhat slow-motion effects of the Retail Distribution Review (RDR), implemented in January 2014, which eliminated intermediaries’ financial incentive to recommend high-cost actively managed funds.
2.  The ever-growing body of irrefutable evidence that, not least because of their indefensibly high charges, the very large majority of active funds underperform their low-cost passively-managed counterparts.
3.  The shamefully-belated new effort by the regulator to tackle the industry’s bad practices and help consumers get a better deal.

Over the next few years, the combination of these and other factors will change the industry in many ways.  But the one that most interests me is now clearly apparent:  pretty much all big and reasonably businesslike firms are feeling the need to ask themselves the question:  “What makes us different, a) from each other and b) from passive firms who charge 85% less than we do?”

For most, this is a horribly difficult question to answer, or at least to answer well.  (The troubling answer “Absolutely nothing” is readily available).  A few firms do already own, or in some cases partially own some kind of differentiating idea, and they’re much more strongly placed.  But most really don’t, and it’ll be fascinating to watch them grappling with the issue.

The key issue, it seems to me, will be to do with the balance of power between the marketers and the fund managers.  As I’ve often written in this blog, hitherto this has resided about 98% with the fund managers and 2% with the marketers, whose job is confined to producing the brochures and the sales aids and even then the fund managers tell them what colours they want them to be.

But in the evolving new world in which marketing assets like a differentiated positioning, a strong brand and a convincing value proposition are suddenly absolutely mission-critical, this long-established balance of power isn’t going to work any more.  A bit like star chefs newly-dependent for their survival on their pot-scourers, or airline pilots humiliatingly subservient to the cabin crew, an awful lot of pride-swallowing is going to be necessary.  At the moment, I really wouldn’t like to say whether I think they have it in them.

I was right. We were a better choice for asset management clients.

For obvious reasons I’d better keep this anonymous, but I’ve fairly recently heard some war stories from inside a non-specialist agency pitching for an asset management client.

It’s been pretty fraught, and as you’d expect a lot of the available time has been wasted on getting up to speed with how this difficult and complex industry works, who the target audiences are, what sort of brand promises can be made (and kept) and what restrictions are imposed by the regulator.

But beyond all these issues, most of which I suppose are the sorts of things that arise when an agency starts work in any unfamiliar sector, what’s really struck me is the sheer difficulty of finding a strong creative solution.  All the above issues apply here too, of course, but there are others that present specifically creative challenges.

Of these, two in particular stand out.  The first is the intangibility and invisibility of the whole subject (or at least of 99% of it).  If you’re advertising a beer, there’s a reasonable assumption that you’ll show someone drinking it, or pouring it, or going to a pub, or whatever,  You may not:  but you always could.  Similarly, if it’s a car, I wouldn’t be amazed to see it being driven.  But what does an asset management look like?  Nothing, that’s what.

Then second, there’s the whole.business of uncertainty and unpredictability, which make it more or less impossible to focus on any kind of end benefit.  We may not want to show someone using our shampoo, but we’re almost certain to want to show someone with great-looking hair.  What does someone with great-looking asset management look like, especially on a day the market’s down 10 per cent?

There are plenty of other problems to overcome, but even setting all of them aside these two make it unusually difficult to identify fruitful territory – especially fruitful visual territory – in which to base your creative approach.

In my agency days, I always used to tell clients (or rather, prospects) that they should appoint specialist agencies like mine to solve problems like these, rather than mainstream agencies which – however talented – would struggle even to understand why they were finding it so hard, let alone to identify a solution.  But I always suffered pangs of doubt about whether the mainstream agency people were so talented that it would be worth working through the pain so as to get through, in the end, to the sunlit uplands of a great creative solution.

My recent insight into a non-specialist pitch has belatedly eliminated such pangs.  You’ll never get to the sunlit uplands if you can’t find a way out of the boggy marsh down at the bottom of the slope.

Change neophyte tweaks leading change guru’s tail

Campbell Macpherson’s recent book The Change Catalyst is Business Book Of The Year, and my book No Small Change, co-written with Anthony Thomson, isn’t.  I therefore have a bit of a cheek challenging something Campbell says.

In a blog about his book on his website, which you can find at http://www.changeandstrategy.com/mission-impossible-leading-change-successful-organisations/, he discusses the practical and emotional obstacles that prevent leaders of highly successful businesses from maintaining the capability to achieve change, and gives some hints on how to overcome them.  He strongly believes that these leaders should encourage and empower their colleagues to put forward their own ideas, and the following somewhat edited quote will give a flavour of his recommendations:

“Make continuous improvement a core part of your company’s DNA:  Change doesn’t have to be large and disruptive to be effective. The most effective and sustainable changes are often evolutionary rather than revolutionary. Every leadership team needs to help their people to embrace an attitude of continuous improvement – and empower them to act upon it.

Allow your people to (constructively) question the status quo.  This is where your newer employees will add the most value. Allow them to (constructively and respectfully) query the way things are done.”

It’s true that these are not his only tips on the subject, and at least one of the others suggests more radical measures.   But I do wonder, looking at what’s written here, whether it’s all a bit, well, timid.  I think it was that bracketed “constructively and respectfully” that aroused my suspicions.  Should employees of Pony Express in the US in the 1860s have “constructively and respectfully” have pointed out that the country’s first transcontinental railroad was about to open and would quickly wipe out most of their business when it did?  Should employees of Polaroid in the 1990s have “constructively and respectfully” flagged up a teeny concern that perhaps this digital camera thing might prove a bit of a problem?  I could go on, but you get my point.

And anyway, as I say, my point really isn’t a very fair one.  Campbell isn’t only suggesting constructive and respectful process-tweaking, and anyway such humble actions do often have their place.  On other occasions, though, an expression involving the words “deckchairs” and “Titanic” does come to mind.

We really must start making things simpler. Especially the complicated things.

Abraham Okusanya is unquestionably a good bloke.  He and his investment consulting firm Finalytiq are 100% on the side of end-consumers, and they’re doing everything they can to ensure that fund management firms do their best for them.   But when it comes to one of the fault lines dividing consumers’ real friends from consumers’ not-so-real or indeed false friends, as identified in my new financial services marketing book No Small Change, I’m afraid that Abraham is on the other side of the line from my co-author Anthony Thomson and me.

Let me explain.  Abraham has just written a hard-hitting article in the online edition of FT Adviser that’s highly critical of Absolute Return funds in general, and Aberdeen Standard’s giant GARS fund in particular.  He has one massive objection to them:  they’re far too complicated.  He says:  “Hands up if you really understand how GARS works? Enough to explain it to a typical client? I certainly don’t.  Many advisers and discretionary fund managers who invested in GARS didn’t.  I’ll wager that many analysts and managers who work at the Standard Life multi-asset teams and indeed the most senior people at Standard Life don’t either.”

And he goes on to deliver his coup de grace:  “If all these professionals don’t seem to understand the fund, what hope has poor old Mrs Miggins got?”

Leaving aside my intense dislike of the patronising, alienating and horribly over-used term “Mrs Miggins”, it’s the sense of what Abraham’s saying that bothers me.  Let me be clear:  if he was saying that Absolute Return funds like GARS don’t work, or can only find a market by making false promises they won’t be able to keep, then I’d completely share his intense disapproval.  But he isn’t.  It’s the complexity that’s upsetting him.  And for the life of me, I cannot understand the financial services industry’s obsession with explaining how complicated things work, whether to our colleagues within the industry or to our poor old end customers.

It’s not just Abraham who wants everything explained.  It’s everyone.  It starts with the regulator, who has insisted for years on a regime which provides consumers with rafts of unintelligible and impenetrable detail about whatever it is they’re putting their money into.  It includes all those who keep calling for a massive educational effort to get key financial concepts across to consumers so that they’ll become better able to grasp the detail of what we’re offering them.  And it also embraces all those firms publishing mountains of market reports, pie charts, analyses of one sort or another, fund manager interviews and all the other manifestations of an industry that’s grimly determined to explain itself to people.

No other industry behaves like this.  There are countless examples of industries that provide complex products and services, but which feel no obligation at all to explain how they work either to their end customers or indeed to their intermediaries – or “shops” as they are often known.  People buy all sorts of IT products – phones, tablets and computers – without having the faintest idea how they actually work, and the amiable sales guys and girls in PC World and my Vodafone shops don’t know much more.  You can buy a car without knowing a thing about the mechanics of ABS braking, and perhaps more crucially you can take a daily statin or SSRI tablet without a clue about what they do to your body chemistry (or even what SSRI actually stands for – Selective Serotonin Reuptake Inhibitors, since you ask).  And, trust me, the same is true of your average GP.

What all these things have in common, as well as complexity that makes their workings quite incomprehensible, is a clear and simple message about what they do – or, to put it another way, about why people might want to buy, own or use them.  I don’t know anything about how ABS brakes operate, but I do know that if I put my right foot hard down on the pedal on a wet and slippery road I’ll come to a stop without skidding.  And I don’t know what that Atorvastatin tablet I take every morning does when it gets into my bloodstream, but I know that somehow it reduces my cholesterol level and that makes it less likely that I’ll have a heart attack.  And these simple, clear messages are absolutely all I need or want to know.

At the same basic level, I understand – more or less – what GARS is supposed to do.  It’s supposed to keep going up in all market conditions.  This, I must admit, sounds a bit too good to be true, and makes me wonder whether I’ve got it quite right.  In all market conditions?  Really?  And going up, not just standing still or going down less than the market?  And is this just a pious hope, or a solid promise, or something in between?  (ABS, after all, doesn’t say that it aims to prevent you from skidding, or that you won’t skid quite so much – it says you won’t skid, period, and you won’t.)   As I say, if the GARS/Absolute Return Fund headline promise is false, or overclaimed, then that’s bad and I’m against it.

But if it’s robust, I have no problem with it at all.  And as we move slowly but irreversibly into a world in which consumers are going to have to take more responsibility for their financial security, and make more of their own financial choices and decisions, it becomes more and more important that we present them with those choices and decisions in ways that are meaningful to them.  Which, in turn, means that we have to stop presenting those choices and decisions in ways that are only meaningful to the most pointy-headed specialists and experts in the industry.

In fact, it may well be that in order to present consumers with “headline” benefits that are valuable and meaningful to them, we need products and services which, when you lift the bonnet, are even more complicated than absolute return funds.  That prospect doesn’t bother me in the slightest – provided only that Abraham, and all those others around the industry who think like he does, can be discouraged  from making even more doomed and counter-productive attempts to explain them all.

The book’s out, and only one word describes how I feel

Regular users of LinkedIn will know that the word is, of course, “humbled.”   If pretty much anything good happens to you – especially anything good which makes you feel any emotion in the proud/self-satisfied/vindicated spectrum – the way you feel these days is humbled.

Words change their meanings all the time, and it’s not unusual for them to flip more or less through 180 degrees and start taking on the opposite of their previous meaning.  In somewhat different parts of the English-language forest, words such as “wicked”, “awful” and “egregious” come to mind.   Even by these standards, though, the recent transformation of “humbled” is striking.  According to the dictionary, it means “feeling less important or proud” or in a different sense “decisively defeated.”  According to hundreds of LinkedIn posts, though, it means “proud and happy and wanting to show off about whatever it is, but in a way that doesn’t sound too insufferably smug.”

No Small Change, my financial services marketing book co-written with Anthony Thomson, is now published.  And we’re both feeling truly, madly, deeply humbled.