Lucian’s blog

Some very boring things are extraordinarily popular as Christmas gifts.   Among the items I’ve seen displayed in ads and shop windows over the last few weeks, the inevitable socks, saucepans, blank DVDs and security camera kits come to mind.

But among all the thousands of items offered for my consideration, I can’t think of a single one from the wonderful world of financial services.  No seasonally-wrapped and packaged financial products (OK, that does sound a bit unlikely) and not even any FS-linked Christmas collateral - snow-covered piggy banks, chocolate money presented in genuine cash bags.

This may sound like a stupid and trivial observation, and maybe it is.  But actually, I think it’s a bit more important than it seems.  I wrote very early in the lifetime of this blog about the way that financial institutions - even the most mainstream high street ones - never seem to find any opportunities to become part of day-to-day life, and, in particular, never succeed in engaging in any way with children.  As a result, I wrote, by the age of 12 or 13 or so, most kids have in their minds pretty fully-formed brand landscapes, including not just brands that are directly relevant to them but also many - even most - of the brands that are meaningful to their parents and close families.  But there’s one great big void, one unmapped continent - a chunk of the landscape which remains entirely featureless:  this is of course the land of financial services.

I accept that it’s difficult.  When it comes to engaging with, say, 9-12 year old girls, a long, long list of brands - Accessorise, Hello Kitty, Mac, Facebook, hundreds more - are better placed to make contact than Barclays and Halifax, let alone Legal & General and Standard Life.

But still, there must be some worthwhile ways that some of these institutions - especially the branch-based ones - could become more engaged with daily life.  Just concentrate on something as small and simple as ATM till receipts:  could they carry some really funny jokes?  Or some celebrity anecdotes?  Or an entry number for a prize draw?  Or a collectible set of images?  There must be a way to make them worth passing on to the kids. 

It seems that while the most successful consumer-facing organisations find more and more ways to become part of our lives - online service providers like Google, offline retailers like Tesco - financial institutions’ bandwidth gets narrower and narrower.  At the same time, many, of course, still spend fortunes on huge one-dimensional sponsorships..  If I was in charge of those budgets, I’d scrap the lot - and corner the Christmas chocolate money market.

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On Sunday evening, in a somewhat disorganised not-quite-final Christmas shopping round, I put in three separate orders to Amazon, for three CDs, a DVD and a Playstation 3 game.  This morning, less than 36 hours later, all three packages arrived (delivered, incidentally, by first-class Royal Mail) at my office.  That wouldn’t be bad over any 36-hour period, but it’s even more impressive over a snow- and ice-laden 36 hours which have been very far from the easiest for moving things around the country.

In fact, perhaps unfairly, I can’t help wishing that Amazon and Royal Mail, not British Airways and BAA, were responsible for getting me back from Edinburgh yesterday afternoon.  Complete nightmare:  to cut a long story short, horrendous security queues at Edinburgh airport, would have missed plane except that it was an hour late, flew down quickly and landed only 45 minutes late but then sat on the tarmac at Heathrow for over three hours until we could get off the plane.  (No empty gates, no buses, no steps, no nothing, and also no information, no reassurance for the dozens of transit passengers on board who were clearly going to miss their connections for their Christmas destinations and not even a free drink from a sympathetic and apologetic, but ultimately ineffectual, flight crew.)

OK, not as bad as the really nightmarish nightmare of the five trainloads of Eurostar passenger who spend fifteen hours or more trapped under the Channel with even less in the way of food, drink, information or indeed loos.  But still bad, and stupid, and unnecessary, and clearly reflecting a complete failure in planning and communicating  between the two organisations involved - in my case, British Airways and the World’s Worst Company, BAA.

By a remarkable coincidence, a report published yesterday has given BAA hope that they won’t after all be compelled to sell off two more of their UK airports, one in Scotland and one around London:  apparently there was some sort of conflict of interest among the body drawn from the ranks of the great and the good who were responsible for the original ruling, and the whole process now has to start all over again.

On the face of it, this is bad news if it means BAA get off more lightly.  Personally, I would take a savage pleasure in disqualifying BAA from ever running anything ever again.  But I suppose there may be an upside:  presumably it’s not completely impossible that a new panel drawn from the ranks of the great and the good may decide to demand an even bigger-scale dismantling of BAA than the last one did, especially if any of those taking part in it were flying into Heathrow yesterday evening.

Just a thought, for any panel members so inclined:  you could always ask Amazon to take over.Â

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It really is quite extraordinary.   In 1986, the financial services industry (investments, pensions, life assurance, all the hardcore stuff) stopped caring about consumers and started focusing all its love and attention on intermediaries.  For 23 years, they’re all we’ve cared about.  “Get the intermediary marketing right,” everyone decided, “and the end consumer side will take care of itself.”

In a world where intermediaries’ market shares of the product categories in question were up in the 70-something, 80-something and even 90-something per cents, I suppose this strategy made sense (although it has also been incredibly boring to execute).

But now, in 2009, all of a sudden, it’s all completely flipped around.  We are so not interested in intermediaries that we’ve almost forgotten what “IFA” stands for.  In the last few months, I’ve probably talked to more people about more new initiatives than in any other equivalent period in my career:  and not a single, solitary one of them has had anything at all to do with intermediaries.  On the contrary, every single one has had absolutely everything to do with end consumers.  It is literally as if a light has been turned off in one room, and turned on in the room next door.

“Why?” I hear you ask.  “What’s it all about?”  Well, I think it was Sherlock Holmes who said that the suspect most likely to have committed the murder is the one with means, motive and opportunity - and the same’s also true of those most likely to have rediscovered the end consumer. 

The means is the Internet.  With something like 70% of the population now having access to nice fast broadband connections, engaging them in not-completely-simple application processes and ongoing service delivery has become a realistic proposition.

The motive is mainly RDR.  For providers, trying to manage their IFA-channel business without the lever of commission is like trying to fly a plane without a joystick.  Combine that unappealing prospect with predictions that up to 40% of the current number of IFAs may pack it in and head for a Bexhill bungalow in the next couple of years, and you can see why providers feel a pressing need for a Plan B.

And the opportunity is the fact that the poor old punchdrunk consumer, having been bruised and battered in just about every encounter with the financial services industry in recent years, is right now gradually and gloomily taking on board the dismaying reality that if he or she wants to achieve any kind of long-term financial security for him or herself and his or her family, he or she is going to have to start encountering the industry a whole hell of a lot more over the years from now on.  

Put these three considerations together, and you’ve got the picture.  I don’t know of any major financial services provider who is not looking at some sort of B2C proposition at the moment.

To which, quite frankly, after pausing for a decent period to consider the strategic rationale, the only thing I have to add is “Yay!  Whoo-hoo!  About time!  All right! Hoo-ray!”  If there is a task in the world of marketing services duller and more depressing than trying to engage the interest of independent financial advisers, I’ve yet to discover it.  With a few conspicuous and admirable exceptions, most manage to bring together a truly toxic combination of ********, ***************, ******-******* and *******.  (see comment below).  To be able to turn our attention away from them and concentrate on communicating with the poor bloody consumers who many have treated so badly over the years is a liberation indeed.

So, yes, Mr Holmes, we admit it.  It’s a fair cop.  We did indeed have the means, the motive and the opportunity, and we did indeed commit the crime.  And now, we’re glad, we tell you.  Glad.  Glad.

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In the best-of-2009 pieces that you get in the marketing and advertising press at this time of year, Aleksandr the meerkat is going from strength to strength.  Last week, for example, he was by far the most popular choice among the 300 or so luminaries featured in Campaign’s preposterously pretentious annual publication The A List, supposedly a directory of everyone who matters in advertising and marketing services (”preposterously pretentious”, of course, being code for “not including me”).

Many people have noted the obvious extraordinary thing about Aleksandr, that he shines like a blazing beacon in the huge, dark, empty landscape that is memorable financial services advertising.  But not so many people have noted the equally extraordinary thing, that he shines like an equally blazing beacon in the huge, dark, empty landscape that is engaging and rewarding direct response advertising.  Comparethemarket.com, like other price comparison sites, is a hardcore direct marketing organisation, and measures everything it does in terms of its short-term ability to bring new customers to the website:  whenever the company is quoted on the success of the campaign, it’s this that it emphasises.

These days the figures are getting into the almost-too-good-to-be-true category, but I think we’re currently claiming that comparethemarket.com has gone from 4th to 1st in the price comparison market, and the campaign’s cost-efficiency is up by over 400%.   And, importantly, the TV campaign is not working primarily as a brand-building, feelgood-factor overlay encouraging consumers to pay attention to stacks of hard-nosed direct marketing stuff in other media.  Sure, there’s some of this going on, but overwhelmingly people are going straight from the television - maybe via Google - to the website.

Why am I so excited about this?  Followers of this blog will understand:  Aleksandr’s success is, as far as I’m concerned, another bad blow for all those who think that the advertising game is basically about delivering propositions, and that the best creative executions are those with the most Transit-van-like ability to do so.

If that’s right, then what’s the proposition in the comparethemarket.com campaign, for heaven’s sake?  Think about it.  Think hard.  Yes, you’re right, there isn’t one.   The campaign proposes that comparethemarket.com is a good place to go for “low price car insurance.”  That’s it.  And with sufficient engagement, that’s all you need.

In celebrating the idea that Aleksandr has finally called time on proposition-based advertising - not just when it comes to fluffy brand stuff, but in the cost-accountable world of DM too - a few caveats are necessary.

First, you need TV.  If TV sales directors could have created the perfect sales tool for the next decade of airtime sales, Aleksandr would have been pretty much it.  You couldn’t make him work in print, or digital, alone. 

Second, you need to be operating in a familiar and straightforward category where a broad consumer target market understands perfectly well what you’re offering, why it’s relevant to them and what the benefits might be:  this is not the way to launch unfamiliar and/or niche-targeted products or services.

And third, I suppose, and probably most important, will anyone actually notice a Russian-accented calling of time coming from a small furry animal, or will most of them carry on obsessing about bloody propositions that consumers couldn’t care less about?  I’m not holding my breath.  Even the new crop of Aleksandr-driven campaigns in his own price comparison market, as well as being toe-curling beyond measure, don’t seem to have clocked this yet, although I’m not sure because I have to close my eyes, block my ears an la-la-la loudly when they come on, especially Go Compare.

Anyway.  Enough of the intellectual analysis already.  A Russian-speaking meerkat in a smoking jacket has reinvigorated not only financial services advertising, but direct marketing communication as a whole.  Rejoice, as that ghastly woman once said.  Rejoice.

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I wrote something in this a long time ago about statistics that I described as “conceptually true” - figures that are completely unproven, and very likely wrong, but still cast useful supportive light on concepts that are in fact true.  (For example, that when he gets a chance inside the penalty areas Jermain Defoe is less likely to miss than any other Premiership striker.  Or that in blind taste tests, consumers regularly agree that Stella is by far the nastiest of all lagers.)

In this week’s Financial Adviser, the columnist Tony Hazell quotes new figures that prove that standard rate taxpayers saving regularly for 40 years will have a larger pot at the end of the period if they save in an ISA rather than in a pension.  There’s not much in it - £330,000 plays £328,000 - but bear two additional points in mind.

First, the pension example that Hazell uses is a low-cost stakeholder, with charges of 1.5% p.a.  For anyone in a high-cost, old-fashioned pension, the difference would be far greater.

And second, remember that the money in the ISA suffers from none of the restrictions affecting the money in the pension.  You can take as much or as little out as you want, tax-free, at any time (up to and including a 100% tax-free lump sum when you retire).  And you’re never under any obligation to buy an annuity:  your choice of draw-down strategies is infinite.

OK, it’s different for higher-rate taxpayers.  And from 2012 onwards, Personal Accounts will make even the 1.5% annual charge that Hazell uses in his sums look expensive.  But still, for now, and for basic rate taxpayers, he has well and truly let the cat out of the bag.  For many, both within and outwith the industry, these figures will come as a revelation.

Not me though.  Without a shred of hard evidence, I’ve been quoting very similar figures for years.  I’m not surprised.  Just mildly relieved.�

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Some people are quick to detect insults.  I’m quick  (too quick?) to detect compliments - better for the ego. 

In a piece in a financial paper last week, the admirable campaigning financial journalist Jeff Prestridge wrote about a panel discussion he was about to take part in.  He was nervous, because he intended to put forward some “provocative” opinions in front of an audience of quite senior industry people.  But, he said, “thankfully,” he will be joined by “other pro-consumer representatives on the panel all chomping at the bit to have their say.”

Maybe Jeff simply hasn’t noticed what I do for a living.  But if he does know that I’m paid to tell the stories my clients in the industry want to tell to consumers of one sort or another, and if he still thinks I can be counted as a “pro-consumer representative,” then either:

a) he’s very naive, or

b) I’m a good con-man, or

c)  by some miracle, I’ve managed to pursue a career in financial marketing services for well over 20 years and retain a few fragments of my integrity. 

Probably a), I suppose, realistically.

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Way back in my days in big-ticket consumer brand advertising, I was surprised when someone told me that one account - actually it was Mars/Pedigree Petfoods - was single-handedly responsible for producing 120% of the agency’s profit.  Not knowing much about percentages or profit at the time (plus ca change, you say) I thought this was some kind of joke or beancounter’s trick, but actually it was absolutely correct:  Mars/Pedigree paid us a fortune, while even though some other accounts made small amounts of money a large number were loss-making.

Over the years, it’s gradually become clear to me that an awful lot of other businesses work in much the same way.  The other day, a client was explaining the structure of his business to me:  it was divided, he said, into ten business units.  I asked him how they broke down in terms of profitability.  “This one makes money,” he said, pointing at one box on the organogram, “and the other nine lose it.”

Things can get even more extreme than this.  Apologies if I’m misrepresenting him (I don’t think I am) but recently I heard a conference speaker from Google explain that Google’s paid search advertising business generates such a stupendous amount of money that they don’t really care whether other Google businesses have any potential to make money at all.  Most of those other Google offerings that you can see on the home page - maps, documents, photos, analytics and so on - don’t make money and never will.  Most don’t even have theoretical business models.

It makes you wonder.  It may be that all these examples are untypical - that in most businesses, most parts of the business make more or less the same kind of margins.   But I doubt it - and, as a result, I can’t help wondering what would happen if all the corporations involved simply decided to close down all their underperforming business areas.

Of course they’d find it was all a bit more complicated than it looked.  In getting rid of all its other clients, my old agency with the Mars/Petfoods business would be faced with a horrendous all-round downsize, and in the short term following it through would be hugely - maybe even unaffordably - expensive.  It’s not going to happen.  But if it did, and really ruthlessly and rigorously, I wonder how many of us would still be left in work.  On the basis of my own firm’s margins over the last couple of years, not me, that’s for certain - perhaps I should stop enjoying myself writing this non-income-generating stuff, and get on the phone and try to drum up some more business.

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What is the matter with life assurance people?  More than any other sector of the financial services industry, it seems their one great pleasure in life is hand-wringing.  Every year they get together in all sorts of meetings and forums (a dinner to mark the publication of Swiss Re’s Insurance Report being the most recent, on Wednesday evening) to look at statistics demonstrating a continuing and very likely accelerating decline in the sales of their products and to listen to speakers, often drawn from their own ranks, lambasting them for their miserable failure to do anything to arrest the decline.  Hand-wringing takes place on a scale not otherwise seen outside the meetings of OCD Sufferers Anonymous.  And then they go away and spend the time till the next meeting or forum doing precisely nothing about it.

On this particular occasion, many of those present could, for what it’s worth, claim that rather than doing nothing,  they had in fact recently been doing something completely unsuccessful.  A man called Tom Baigrie has been trying to get a couple of dozen firms in the protection market to sign up to fund a generic advertising campaign intended to terrify the poor old public into buying more life assurance.  After many discussions and deliberations the Not-So-Dirty Two Dozen decided not to fund these scare tactics, so Mr Baigrie has packed up his tents and gone away.

I must admit, I’m delighted about that.  Firms basically toyed with the idea of a generic campaign largely because it seemed to offer them a way to do something fairly significant without having to stump up a significant amount of cash.  As FS providers should know better than most, if something looks too good to be true it usually is:  the generic campaign might cost each firm only a twenty-fourth as much as doing something on their own account, but that’s because it would have been a twenty-fourth as useful.

Anyway, apart from the fact that there was some talk about this very recent and unsuccessful distraction, the Swiss Re event followed the usual pattern in every respect:  masses of gloom and doom in the statistics, much lambasting from the speakers (myself included), hand-wringing visible in every corner of the auditorium, a decent dinner, a few drinks and everything forgotten till the next time.

As I’ve said before, in the life assurance market the real problem is that we’ve spooked ourselves.  Marching under a huge banner bearing that enormously damaging and misleading slogan LIFE ASSURANCE IS SOLD AND NOT BOUGHT, we’ve collectively taken ourselves to a place where we’re convinced that it stands alone somehow outside the world of marketable products and services, a pariah product that consumers would be sure to shun if anyone was foolish enought to put it in front of them. 

I’m absolutely certain that this is absolutely wrong.  It’s true that life assurance “is” sold and not bought, but that’s not at all the same as saying it “has to be” sold and not bought.  It’s only “not bought” because no bloody company is ready to make it easy, accessible and visible enough for consumers to buy.

Sooner or later, surely, someone must have the balls to challenge this misguided orthodoxy.  It should be possible to spot who it’ll be - they’ll be the ones at the next meeting or forum not sitting there wringing their hands.

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You could say that in the last few weeks, two of Gillette’s three ad campaign galacticos have been found to have feet of clay, although in fact it wasn’t actually Mr Woods’ or Mr Henry’s feet that did the misbehaving.

I suspect it’s all the outcome of an on-set conspiracy.  Faced with another script involving humiliating sub-locker room razor-related antics, and advised by their lawyers that their contracts were watertight and that only gross misconduct could lead to early termination … well, you get the picture.

Two down and one to go.  Thierry had cheating on the field, Tiger had cheating on his wife - Roger, what was on the slip of paper you drew?Â

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Imagine the retail investment marketplace as a circle.  Say, for the sake of argument, that at the 12 o’clock position we place the fund managers;  at the 4 o’clock position we find the life companies;  and at the 8 o’clock position there are the IFAs.

Here’s the funny thing:  working in a clockwise direction, it seems that just at the moment each kind of organisation is eager to transform itself, in terms of perception at least, into the next one along.

The fund managers are starting to want to be perceived like life companies.  In a world of commoditised wrappers, they think that being seen merely as an investment “engine” within someone else’s car doesn’t make sense any more.  Increasingly, the bigger and more retail players are beginning to toy with those bigger-picture, more emotionally-based brand positionings historically owned by the life companies - an area perhaps most quintessentially summed up in the strapline used for a short while some years ago by the doomed UK life operation of the Australian firm AMP, “creating better futures.”

Meanwhile, in what seems to me a newer and more surprising development, life companies are starting to want to be perceived like IFAs.  Recognising that in a post-platform, post-RDR world their existing role as “product providers” won’t make much sense any more, some are gradually coming round to the idea of becoming IP-driven businesses, having the know-how to design appropriate solutions for consumers.  The most IFA-like are already developing plans to deliver this know-how direct to consumers, mainly via the internet.  Others still intend, for the time being at least, to work alongside “proper” IFAs.  But either way, the key change is that providing the “product” becomes a much smaller challenge than designing the solution.

And then, down there at the 8 o’clock position, some of the biggest and most successful IFAs are starting to behave more and more like fund managers, managing money in line with clients’ instructions and guiding the clients on formulating those instructions in the first place.  Admittedly here when I say “some” of the biggest and most successful IFAs I really mean one, Hargreaves Lansdown, whose Vantage platform enables a large and growing number of clients to do for themselves things that discretionary or advisory managers have always done hitherto.  But in a world where HL is making bucketloads of money while most IFA firms totter on the edge of insolvency, it’s hardly surprising that there are an awful lot of people out there looking very carefully indeed at what that clever Mr H and Mr L are doing, and trying to figure out how they could do it themselves.

So there you have it.  According to this analysis, everyone’s moving round one space to the right.

Except…

To be honest, I think I could have equally well written a piece saying that everyone’s moving round one square to the left. 

IFAs with their own branded platforms and tax wrappers want to become life companies;  life companies who put increasing emphasis on the importance of asset management (as Standard Life for example now do) want to become fund managers;  and fund managers who now almost all want to build their own D2C open-architecture platforms are stepping further and further towards the advice space, or at least the information-and-guidance space, and intending to offer investors an alternative to that clever Mr H and Mr L.

So everyone’s moving around, either to the left or maybe to the right, except of course the ones who are staying put.  Well, I did say it’s a situation that makes you dizzy.  And also, to be honest, a situation that makes it quite clear that I have no clear perspective at all on what’s happening.  But one thing I’m quite sure about is that an awful lot is happening - those tectonic plates are moving further and faster than at any time since polarisation back in the late 80s.

The driver of change is, of course, primarily RDR, with the Internet playing an equally crucial role as the facilitator of change:  together, the two are doing a pretty good job of spinning the industry round and round, upside down and inside out just at the moment.

I’m loving it.  But then I love change, and in my job continuing change provides me with the prospect of a nice secure stream of income.  If I didn’t like change, or if I was in a client-side job where continuing change actually provided me with a growing threat to the security of my income, I don’t think I’d be loving it at all.

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