Simon Willoughby, head of proposition at Axa Wealth International, asks whether financial services providers can learn any lessons from the fast food industry.
At the end of last year, I enjoyed a five-day break with my wife in Lisbon. Being late in the season, the holiday was relatively inexpensive, allowing us to eat out at some good restaurants.
It was outside one such establishment that I was the subject of a mild rebuke from my wife. One night, as we cruised the many restaurants, she became irritated when I insisted on walking straight past any that displayed pictures of the food on offer.
She informed me I could not assume it was a bad restaurant just because there were photos of what we could eat. Her point was that the pictures were to help people of different languages choose a suitable meal and that I should not be so judgmental.
Can the industry learn from fast food outlets?
Personally, I think avoiding restaurants with picture menus is a pretty useful rule of thumb, largely on the basis that having to point at what you want to eat is inconsistent with the spirit of travelling abroad and trying new dishes. In my world, I associate picture menus with fast food outlets, not proper restaurants selling local authentic cuisine. According to my wife, that makes me a food snob.
As we toured Lisbon over the next few days, I reflected on my shaming and began to consider how restaurants and fast food outlets promote their ‘product’ compared to that of financial services providers.
The question I was wrestling with was this: if it is possible to dumb down the ordering of food to the point consumers merely have to point to photos, are there lessons financial services providers can learn?
If you go into a fast food outlet, you generally know you are hungry and, broadly speaking, what you want. You order, get your food, eat it and dispose of the packaging. Easy, if not always nutritious.
Contrast this with financial services. In the part of the sector I work in, where open architecture investment bonds are the norm, this is the equivalent of having a restaurant with tables, cutlery and a waiter but no menu. Consumers decide what they would like to eat, the chef goes out to get the ingredients and cooks them.
Comparing the two, the fast food outlet is able to commoditise the whole process and offer its food at low prices because there is very little choice, merely variations around a central theme.
Running costs are also lower, as lower-paid workers are required to operate the process. Financial services, on the other hand, can be very different: ‘choice’ equates to ‘cost’ and staff have to be skilled, which also equates to ‘cost’.
In addition, there are many more financial services providers than mainstream fast food outlets. However, ironically, the products within each of the sectors are remarkably similar to each other.
Despite the sameness of financial products, it is surely their relative complexity that sets them apart from fast food, as well as the sums of money that can be invested in them compared to a burger and fries transaction.
In reality, financial products are so complicated that consumers need some expert advice before purchasing. Like the Food Standards Agency, we have a whole raft of regulations to ensure providers do not produce duff products, but also a whole set of other regulations relating to the advice given.
It could be that the existence of changing regulation and the financial advice process itself ensures providers make their products more complex than they need to be.
In some cases, products are so complex that the consumer requires independent advice to understand them.
In a post-Retail Distribution Review world this is, unwittingly, resulting in more consumers being excluded from the advice process. Perhaps it is not possible to dumb down the sale of financial products to the point consumers only have to point to a picture of what they want.
However, surely there is a halfway house where product providers are not merely offering consumers an opportunity to order off a menu entirely of their own choosing – and pay for the privilege.
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