Three reasons why the financial services industry needs to do better
18 October 2017
When it comes to keeping customers happy, why are financial services companies still falling short?
Are you happy with the companies that you trust to look after your money? Or do you think there’s serious room for improvement? Modern life has changed the way we interact with most companies: we value those that try to make our lives easier, and we’re quick to back away from those that don’t. But the financial services industry seems to be the area where this attitude doesn’t seem to apply.
In September the Financial Services Ombudsman published its annual complaint figures. It’s pretty unpleasant reading. It took 170,000 complaints in the first six month of 2017. And these complaints were broadly spread across most types of financial products. It’s worth noting that complaints only reach the Financial Ombudsman after the provider has tried to resolve the complaint with the customer. The data shows that companies are getting better at resolving customer complaints, but clearly the relationship that people have with financial services providers has to change. We’ve identified three problems that reveal where companies need to be better:
Number 1: People don’t trust the financial services companies they deal with
In 2015, we asked 2,000 adults whether they trusted financial firms to give them the service and support they need. Just one in five (20%) said they did. Many of us have a confused and contradictory relationship with our financial services providers. Consumers mistrust the finance industry yet stay with the bank they’ve been with for years, and they appear reluctant to switch and try something new. This is often characterised as an attitude of ‘no point switching, they are all the same anyway’.
People are being let down all across the spectrum. On the one hand, generations of people don’t feel financially literate, while others who do consider themselves knowledgeable about saving and investment have been let down by poor returns and bad customer service.
Number 2: People are struggling to take care of the ‘here and now’
It’s hard to plan for the future when you’re already busy trying to make ends meet. The cost of living is rising and, without help, it can be hard to factor in savings and investments on top of other household bills.
Many people would like to be more knowledgeable about their finances and hopefully save more, but simply don’t know where to begin. And if you already feel bamboozled by financial services, you’re more like to feel left out, left behind, and unable to afford the financial advice or products that could make your life easier.
Number 3: People know they aren’t doing enough for their future
The majority of people in the UK aren’t saving nearly as early, regularly or as much as they should, which is storing up problems for later in life. It’s easy to read headlines about having to work longer and being forced to retire on a meagre pension. But it can be hard to focus on retirement planning when your current financial situation is less than secure.
Regardless of your financial status, anxiety can often lead to inertia. We have a younger generation who can’t afford to save, and for whom retirement is too far in the future to rationally consider or plan for. And we also have scores of wealthier, older people who are worried about losing what they have and anxious about their ability to sustain themselves in old age, but yet who are failing to do anything material about either concern.
What needs to change?
It starts with building trust. Financial services companies must return to serving the needs of their customers. There needs to be better education and advice around personal finance and money management. Customers should never be made to feel like uneducated outsiders. They need to feel empowered to take control of their financial future – the reality is that there won’t be just one provider or institution that is going to do this for them.
What is Octopus doing?
We’re determined to improve the relationship that individuals have with the companies looking after their money. Octopus Investments is determined to make investments that are more transparent, more accessible, and more human. We’re also helping financial advisers to build closer relationships with more clients. Octopus Labs is trying to improve people’s lives through innovative products that are making it easier for people of all ages to manage their money. And between us we’re trying to offer better value products, irreplaceable customer service and a sense of optimism about the future.
And the good news is we’re not alone. There are other companies out there that are already starting to bring about change – challenger brands that are responding to the changing needs of consumers in a positive way, with technology that makes managing finances easier and more rewarding. Hopefully they, too, will inspire the rest of the financial services industry to raise their game. So far they are relying mostly on word of mouth to grow their customer base. We’re hopeful that, in time, more people in the UK will reject the tendency to feel like a captive of the financial services companies they use, and instead become more empowered to embrace brighter ways to look after their money.