A shortish, dullish and technicalish blog, this, but I thought I’d quickly mention a point which I hadn’t considered until it came up in a meeting yesterday.
I guess pretty much everyone involved in the RDR would agree that if greater transparency is one of the consequences for individuals – in other words, if individuals can see more clearly and precisely what they’re paying for the various elements of the services they’re receiving – that’s pretty obviously a Good Thing.
(In fact, this transparification process has taken a significant step forward this very morning, with my good friends at Cofunds announcing their new “unbundled” charging structure, to be introduced next year in the run-up to RDR implementation on 1 Jan 2013.)
The point that was new to me – maybe it shouldn’t have been, but it was – is that with all sorts of organisations having different “unbundled” structures, with no consistency about what is and isn’t charged for, the overall effect is complete confusion, opacity and un-comparability.
It’s a problem that we encounter all the time in other markets. When it comes to motor insurance, for example, is a premium of Â£500 a year with protected no claims, a Â£100 excess, free windscreen replacement, courtesy car and free legal expenses better or worse value than a premium of Â£450 a year with unlimited free Green Cards, a Â£200 excess, and a first-year offer of 13 months’ cover for the price of 12? Or with mobile phones, is a 12-month contract with a free iPhone 4, 500 texts a month, free daytime calls within your own network and a flat rate of Â£35 per month better or worse than an 18-month contract with a Samsung Galaxy, unlimited texts, free calls to UK landlines at weekends, half-price insurance and call charges from 1p a minute?
The point about the preceding mumbo-jumbo is that it’s simultaneously a) completely transparent and b) completely opaque. At the opposite end of the spectrum, imagine a completely flat-rate, “one-number” tariff, which says for example that your phone will cost you Â£50 a month no matter how many calls you make or texts you send, no matter when and no matter to whom. A tariff like that is completely opaque – you have no idea how the Â£50 figure is made up. But when it comes to comparability, it’s completely transparent – it’s not hard to see that it’s cheaper than a Â£55-a-month tariff, and more expensive than a Â£45-a month one.
Funny, isn’t it. Everyone agree that transparency is one of the biggest, most valuable and most important new customer benefits that’s going to be available in the brave new financial world that we’re busily spending billions on building. But you can make a more-than-respectable case that actually, it’s a move in completely the wrong direction.