Over-complication or over-simplification
18 Jan 2013

I often think that we (the financial services industry) make an industry out of over complicating what are relatively simple things. For example, read the terms and conditions of a cash ISA account from most providers and you will doubtless not be much the wiser at the end.

Now of course we must tell perspective purchasers what they are getting into, but a cash deposit, protected under the Financial Services Compensation Scheme up to £85,000, with an annual tax year linked deposit limit and a tax free return pretty much covers the basics. Then of course there is rate, notice period, exit terms, etc. But I can't help wondering whether half a dozen bullet points would help consumers much more than a tome of small print.

Under our new UK twin peaks regulatory regime, some providers are (I am sorry to say) likely to increase the amount of small print yet further to ensure that all the bases get covered and that they do not fall foul of the conduct risk regime that is the talk of every industry meeting, forum and board room right now.

For me, we need to get better at looking at things from the customer's view. Of course for seasoned industry professionals who have grown up with the jargon and the careful crafting of Ts&Cs, this is actually quite difficult to do.

I am guessing, for example, that a pilot on an Airbus A380 worries about different things than most of the passengers. He or she will be reviewing the data, ensuring the maintenance has been performed as scheduled and that the many computers on the aircraft are feeding back as they should. As a passenger I am thinking about what will be on the in-flight entertainment system, will the flight arrive at the destination on time and will I manage to sleep.

Now in fairness, I am actually pretty scared of flying, so I am also hoping the plane is OK and that it will take off, fly and land as it should. However if the pilot came on the radio and regurgitated his full list of technical checks I would be clueless. Of course what I want is “we are good to go, the weather is fine and we expect to arrive slightly earlier than scheduled”, all delivered in a calm voice that lets me know the pilot thinks all is well.

Of course we have to place trust in people like that pilot and unfortunately that is where the financial services industry has let itself down. PPI mis-selling, the pension and endowment debacles and the LIBOR scandal are just a few examples. But we must work hard to regain that trust through being clear, fair and looking through the consumer’s lens. This is why we at Kent Reliance are going to embark on a search for customers and members to work with us on reviewing our marketing material and designing our products.

So we need to simplify, but in other industries things can be too simple. I drove onto St. Mary’s Island in Chatham the other day and was taken aback by some billboard advertising for the new Home Buy Scheme linked to new properties for sale there. Board number one simply said 5% deposit, number two said 20% interest free loan, number three said 70% mortgage and four said 100% yours!

Now if that were a financial promotion it would be seriously non-compliant in a number of ways. No mention that the 20% interest free loan is actually an equity stake in the property and that any future value increases have to be bought back at some point, and the 100% yours piece is hugely misleading.

Property developers are not regulated and therefore the same rules do not apply, but whilst we bamboozle with too much information, it seems they only show the good stuff.

As always the truth is somewhere in the middle and the focus to understand risks through our customers' eyes will be a key focus for us at Kent Reliance, in a challenge to find that right balance.