The Retail Distribution Review could provide a much needed catalyst for change in the way financial products respond to consumers' needs and wants, writes Avelo's Paul Yates.
The Retail Distribution Review (RDR) is a watershed moment in the financial services industry in terms of regulation and the migration from commission to fees.
However, it should not just be viewed as a step change for the way in which advice is given, but also a real opportunity to improve consumer engagement in money matters.
To make this a reality, however, financial products and their design must be revisited with the customer at the heart of the proposition to make financial services more compelling and intuitive with smart technology central to this customer-centric method of delivery.
Does financial services need an Apple?
As far as the financial services community is concerned, it is uncharted territory but the success of pioneers such as Apple in redefining its sectors hints at what can be done if we seize the opportunity.
Breaking the mould
Apple broke the mould for the way in which people consume music, film and information, through the evolution of the iPod to the iPhone, through to the iPad and now the iPad mini. The products themselves are built and designed very much with the consumer in mind; even Apple retail stores are tailored towards customer service and interactivity.
Financial services and financial products in comparison may have been designed with the consumer in mind but the journey and technical nature of many products means consumers are seldom fully engaged or able to immediately understand the form, value and benefits.
Traditionally, financial products and services have been difficult to understand and definitely not intuitive. Built in such a way that, while those inside the industry may grasp the intricacies, consumers are often obliged to buy into a service or product without fully understanding what it does or the benefits it provides.
Surely it does not have to be this way? If an IT company that primarily made computers can re-invent the way in which we consume music, why can’t finance and technology develop a new generation of ‘financial designers’ tasked with producing easy to understand products that can truly engage with the end user?
RDR provides a perfect opportunity to do this and to ensure the investors of tomorrow and those approaching retirement have options and alternatives that suit them and, most importantly, products that work intuitively in the way they deal with their everyday lives and finances.
Now is the time for the industry to make big, bold moves. At a time when consumers’ regard for the integrity of this industry has reached a real low, financial services needs to wake up and respond to end users’ actual needs and wants. If we are able to achieve this we can truly begin to rebuild trust in our industry and delight consumers.
There remains a huge amount of uncertainty around the everyday impact RDR will have on the adviser community and also on what has now been commonly described as the ‘squeezed middle’, starved of traditional advice and in need of options and opportunities.
In an ideal world, in the future, the ‘squeezed middle’ will be served by simple financial products and services that meet their needs, while at the same time offering them the advice, support and knowledge needed to meet their financial goals and aspirations.
Will it really take someone like Apple or Facebook entering the financial services world for us to provide consumers with easy to use, intuitive products and services? It may well be the case and, if so, this is disappointing.
I do not believe that, as a community and industry, we do not have the talent to build innovative, intuitive products that serve the needs of the consumer.
The time has come for financial services designers and product developers to take a step back and really look at how we develop products and for whom in the first place.
By placing great consumer outcomes at the heart of everything we do, we will create a connection with the consumer and ultimately a relationship built on trust that will hopefully develop into one that will include various products and services.
Did anyone actually believe that Apple could revolutionise how we consume data, how we speak to one another and how we listen to music? No. But there is a lesson to be learnt: as the old adage goes, in many ways the consumer is always right.
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