In the second part of our roundtable discussion on key pension and retirement issues, RP asks a group of experts how the industry can improve the UK’s appetite for savings. Find Part 1 here
Lawrence Gosling (LG): Where does the consumer education process start and who should start it?
Karen Barrett (KB): The industry has to get a bit smarter about how we communicate and how we educate on the issue of savings. It boils down to personalisation – if you are only being offered relevant financial products, then you can start talking about owning those products, not the whole financial landscape.
Constantly changing savings products and tax breaks does not help promote a consistent message. We are trying to educate a completely changing landscape and there is no consistency of message. Until we have a steadier savings platform, we’re fighting a losing battle.
Samantha Seaton (SS): Having a wide range of different products definitely doesn’t help. People are now wondering whether they should be putting money into a LISA rather than an ISA. Then there is the fact the LISA is quite complicated to understand.
There is also the worry that the government is going to change something to the consumer’s detriment. So they will take their 25% tax-free cash ISA now because it might only be 20% next year.
The emphasis is on worrying about what might happen to the product, rather than focusing on education about saving. It’s a fact that if you’re presented with too many options, you’ll do nothing. As an industry and a country, we’ve got to be thinking about keeping things a bit simpler, but it sometimes feels like a bit of a lost cause.
Peter Mann (PM): We’ve all been through various iterations of government and regulators trying to create simplified advice or basic advice. The reality is that most people they created it for simply do not have any money, so it’s a bit of a waste of time.
The other thing I would say about regulation is undoubtedly regulations in the past five years have contributed quite significantly to a savings gap and then far more regulation was brought in to help reverse the savings gap problem.
You can counteract that and it’s fascinating to watch developments in South Africa, where they have two Retail Distribution Reviews (RDR). They have one RDR for people who have money and another RDR to address various socio-economic demands and monetary structures. Thinking about it differently and thinking about how society is structured may provide a solution.
LG: How can responsibility for education be more evenly spread between industry, regulators and consumers?
Matt Connell (MC): A lot of product providers are more enthusiastic about education because the IT tools are there. Increasingly, an understanding about how people interact with communications is becoming more sophisticated.
With a lack of presence on the high street, providers need to find a way to connect with people emotionally. Providing some kind of meaningful education is part of that, but it is tough because of this shifting regulatory environment.
It is difficult to convey issues such as how different people can have the same set of events but produce a different outcome. So while we have certainly moved on in the past two or three years, it is going to take a long time before that education becomes effective.
SS: We need to accept that there is a limit to how much you can educate people when their interests are often in different areas and on different levels.
You’ll find groups of consumers that are interested because they have a genuine interest and can afford advice; and groups that are disinterested because they can’t afford it and it’s not an appealing topic.
Perhaps rather than trying to educate on the complexities of financial choices, we educate on the basics, such as an analysis of what you are spending and how you could get a better bang for your buck.
I think technology can help, perhaps through the use of clever algorithms that analyse all of your spending.
Lucian Camp (LC): One thing that concerns me about some of the more progressive things happening in financial services is that few of them come hand in hand.
What I think is a profoundly mistaken idea is that you can make your brand famous without spending any money by use of social media and other clever techniques. You simply can’t. None of this is going to have any effect on consumers unless we all stick our hands into our pockets and spend a ton of money on letting them know about it.
One big success story over the past 10-15 years is price comparison sites. Each one spends between £30m and £40m per year on advertising and now 70% of people use price comparison sites to buy insurance. Spending money on promoting stuff works.
Simon Bussy (SB): If you go back 12 to 18 months, a number of the fintech propositions were very adamant that they were going to disrupt the big traditional incumbents and make their mark. There’s been realisation from big banks
and fintechs that neither of them can do it on their own, so what we are now seeing is far more collaboration.
What that will do is bring digital to the table and make everybody aware. There are 80 different digital propositions – some of those are going to survive, some of them just have brilliant ideas, but they will take our industry to the next level.
LG: How can the advice sector encourage higher savings levels?
PM: Pension liberalisation has forced the relationship between the adviser and their client to be much more intimate and longer lasting because people are no longer parcelled off with an annuity.
It is important to have that intimacy, that understanding and that longevity in terms of encouraging people to save.
And while I feel more help is required to support the advice sector, I feel positive because it’s a resilient part of the industry.
MC: Advisers are enormously resilient because they are close to customers. Customers look to advice from friends and family who often suggest an adviser who looks at the world with the same view as they do.
That’s why advisers tend to come out stronger than larger financial institutions. I think that will always be the case.
In terms of encouraging a nation that saves, the challenge is, can we make that advice available for the mass market and not just the lucky few?
KB: Big financial decisions are being overlooked by consumers because they only make them once, whereas life insurance has some repetition. We have now hit that point where we understand as an industry what we can do in terms of technology and how these can lead consumers to make a change.
Putting those things together is going to have a massive difference to people’s lives and how we can help them. Fintech development is going to give us amazing cut through on these issues.
LC: The existing advice business has got fantastic opportunities in serving the higher net worth, older, retirement oriented market. Below that, we can see some wonderful new technology-led services emerge, which are less face-to-face driven and deal with much less affluent people.
SB: Technology and digitisation of our sector and the industry will benefit everybody. It will help advisers make their businesses more efficient. There are already examples of some more forward-thinking advisers who are trying to run an advisory proposition on the side.
There might be ad hoc take-up, but at least they are trying to do something for different customer segments.
Andy Davies: It’s the impact of education. For me it’s all about what you do, not how it works. Where we go wrong with education is that we make it very complicated and very technical. The media has a big part to play in helping us achieve a better balance.
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