Brendan Llewellyn, owner of Marketing Edge and director of Adviser Home, is our Armchair critic, offering an alternative take on all things financial services. In his first column, he asks: why do we have names for products which mean little to the people they're targeted at?
Ruminating on a few of the terms we now take for granted, I carried out a straw poll around the festive dinner table. We had guests so the sample wasn’t too shabby.
First up, I asked what we thought a model portfolio might be. Voices rose as one, with Naomi Campbell and Kate Moss mentioned a lot. So a model portfolio is a collection of photographic assignments. One dissenting older voice queried whether it might be a collection of Airfix planes.
So, attempting to add a bit of context, I asked the question again, but with the handy tip that the answer involved investments.
'Model', 'passive', 'wrap' - will consumers have any idea what these mean?
Ah, well, that would be a perfect set of investments – like a model pupil or model answer, some said. So, it’s perfect then. I wonder what the regulator might make of that. Some might argue that it’s just good marketing to give a good impression but, with the performance profiles of model portfolios varying markedly, I doubt all clients would consider them perfect.
After a suitable break discussing non-financial services matters, I then asked about the other big trend: the shift to discretionary fund management. To a man and woman, the assembled reckoned this was all about privacy.
A discretionary manager would keep mum about your money and where he or she’d invested it. Like a good old-fashioned stock broker.
And a passive investment? Well obviously, it wouldn’t do much. Easy job really: just sit around, press a few buttons and take a cut of the cash. Probably wouldn’t give you much of a return but might be quite safe. Again, not exactly an accurate impression.
What about a wrap? There was quite a variety of views here – all of them wrong. Rather unhelpfully, one of our guests worked in waste recycling so he took us down a few blind alleys. Then we had a few tortilla fans.
How about the terms ‘restricted’ and ‘independent’? It seems there is life yet in this particular chestnut. It’s someone who works on their own – doesn’t have to go along with some larger team, they said.
But, said the table, after only a little more wine, you’d have to prefer independent advice wouldn’t you? Why are they calling it restricted anyway? Must be a ruse to get you to take the independent option – that’s bound to be more expensive. Then we had some notes of annoyance: why should I settle for restricted advice? Is my money not good enough for them?
Over coffee I tried one more. If I were to offer you an absolute return fund (a sector which has been in the news this week), what would you expect to get? Absolutely nothing! Something about Vodka?
Well, you’d get a definite return, obviously your money back, and then whatever they said the absolute return was, the guests around the table said. You wouldn’t be able to compare it with another fund – it’s just what it is – an absolute return.
Would it be so difficult to pick names for our products that mean what we mean them to mean?
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