The operating and commercial models for many major UK financial institutions are seriously broken.
Advisers and consumers wait for hours on the phone to them, listening to messages warning of excessive call volumes. If that message is constant, volumes are not excessive, services are under resourced.
In fact, it seems deliberate, with the caller usually pointed to a company’s digital services as an alternative. The problem is compounded by those online options invariably being poorly built, with the intention of meeting the needs of the business, not the customer or adviser.
Sadly, it seems many of our largest financial institutions are using poor service as an asset retention strategy. If you put enough barriers in the way of advisers, they will not be able to move business away from you.
A classic example is the lack of full integration into the Origo letter of authority project. It is failing because insurers and platforms see it as a way to take money away from them more quickly. Even those finally connecting to the service are not integrating to their back offices which would deliver the real benefits.
Many of our largest financial institutions are using poor service as an asset retention strategy
Similarly, the majority of platform providers balk at integrating with adviser technology to preserve their brand identity as well as, I believe, as an asset retention exercise.
In a slightly different vein, why do we still expect consumers to pay the same regular amounts into savings each month? We know family budgets vary significantly from month to month. Micro savers like Plum, Moneybox and Chip allow consumers to save when it suits them, taking more from their accounts at different times of the month and giving flexibility.
We are seeing classic Darwinism in the savings market as large institutions build operations around their own needs, while flexible, dexterous start-ups give consumers what they want. The problem for institutions is that micro savers and others like them are quietly collecting their next generation of wealth customers.
As Kodak found out, if you ignore the future long enough to protect your legacy business, you end up having no business
Moneybox is now the largest Lifetime Isa provider in the UK and has already helped tens of thousands of people get the keys to their own home. It also knows when tens of thousands more will move into the housing market.
As Kodak found out to its cost, if you ignore the future long enough to protect your legacy business, you end up having no business.
Several alternative operation technologies are being built that will make the next generation of platforms able to run at costs of 0.03%. This will enable new entrants, unencumbered by legacy systems, to massively undercut the established players.
Ironically, when platforms first came to the UK, they rubbished traditional insurers because of their legacy systems. It looks to me like history is repeating itself.
Institutions cannot be allowed to blame legacy systems all the time. At what point should the industry and, perhaps most importantly, the Financial Conduct Authority recognise quite how broken most long-term savings businesses are?
At what point should the FCA recognise quite how broken most long-term savings businesses are?
Are institutionally owned investment platforms, at least as we know them, soon to go the way of print photography? It is time to fundamentally reassess their use of technology and service delivery.
It gives me no pleasure to point out that mighty names, who have been key parts of our personal finance industry for centuries, are exhibiting such worrying behaviour.
Some are on the verge of operational collapse.
If the FCA does not instigate an urgent review of the long-term viability and consumer value of most of the businesses entrusted with the bulk of consumer savings, it will be failing in its duty.
Let’s not wait until we have a major institution collapse before we look for better ways to work.
Ian McKenna is founder of FTRC
