So, 9th November proved to be another standout day in what is turning out to be a stunning year in 2016. A man with no previous experience and a history of <snip : lang cat lawyers> was elected to become POTUS. The world collectively drew breath and waited to see what happens next. Within financial services, providers everywhere excitedly hurried to work. It was a big day, and a chance to demonstrate your worth to clients. Time to issue some market updates.
For a long while now we’ve questioned the value that the information overload the industry generates represents. Even on a normal day this can be overwhelming, but on big event days such as elections/Brexit/budgets etc it’s quite astonishing to see just how much information is unleashed on the wider public.
Industry wide the costs associated with this must be astronomical. Most providers sending out an “Investor update” will have several people involved, ranging from product specialists to copywriters to compliance to web designers. All this effort for something that will be completely ignored or worse still, trigger a knee-jerk reaction.
It was interesting to observe the reaction to this via Twitter yesterday. One financial planner commented that “So far today, I’ve fielded more media inquiries about what to tell clients, than any advisor in our firm has fielded in ACTUAL client calls”. I also enjoyed one well known investment commentator tweeting “FTSE is now up!! People really do talk a lot of nonsense at times like this”. The same commentator had been on BBC News the previous day saying he expected “significant falls” were Trump to be elected. The bottom line with all of this is that no-one can predict the future, and the industry should use uncertain times to collectively focus on encouraging good investment behaviors and calming down the noise, rather than trying to sound clever and insightful.
As part of the recent “Our Future Mission” paper the FCA stated that “It is now clear that, in real life, consumers do not always respond to disclosure in the way many policymakers and regulators have assumed”. Consumers “focus on the here and now”, “use more personal decision making”, “based on a narrative of what they want and believe they deserve, rather than logically balancing opportunity against risk”.
For the regulator to be stating the above is a pretty astonishing admission that they/we have got it wrong, and the way the industry communicates with their customers’ needs to improve. Even if you don’t agree with this, something isn’t right. The Household Savings Ratio is as low as it’s been for a decade, and getting lower. Cash ISA product sales outstrip stocks and shares ISAs by five to one, despite the level of returns achieved in cash, and if I need to carry on I’ll look at pension deficits, household debt, average holding periods for funds etc etc. How correlated this all is to communications is debatable, but the way the industry communicates to its customers is not generating the returns required and needs to be improved.