In My Opinion
Davis, Brian, Management Today
Institute of Management companion Brian Davis, CEO of Nationwide Building Society, suggests how suppliers of financial services might win the public's trust
The words 'trusted' and 'bank' seldom appear in the same sentence. Perhaps this is because, given the everyday stories of pensions mis-selling, home income scandals, and Equitable Life losing its way, it would be surprising if there wasn't a degree of mistrust.
In retail financial services we have to operate to particularly high standards of honesty and risk-aversion. But must every thing be risk-averse, simply to safeguard people's savings?
This is where issues of risk, reward and honesty come together. Not every one needs to be sure that all their money is absolutely secure. But most people do, and it's essential they're not sold some thing that has a nasty surprise at the end. To understand how this is linked with honesty, we need to look at how financial services providers sell their wares.
Advertisements promote the best features of a product - not all the features, just the best ones. If a provider's interest rate isn't great, they'd rather not mention it; if they compare well against some competitors but not others, the latter will probably be left off the comparison tables. If it's an equity investment, it will probably be com pared with a basic building society account. And only the eagle-eyed will spot the qualifying information buried in the small print.
Is this honest? Is it clear? Is it designed to ensure that consumers know exactly what they're taking on? Or is it de signed to generate sales regard less of the real understanding of the purchaser?
Even the much-loved best buy tables are open to manipulation. They represent an instant, spot price, whereas the products they're covering are, even at their shortest, medium term. A good spot price for a few days gets you into the top three. If an organisation then with draws that spot price, it can still claim that it frequently features in best-buy tables. And best-buy tables make good copy.
When endowment mortgage products were first introduced they were heralded as a great alternative to a simple repayment option. Now that market returns have dipped, commentators have been quick to condemn suppliers.
But those who took out an endowment mortgage because a newspaper said they were good cannot then get reparation from the paper. At the end of the day, the consumer made the decision to purchase.
Many commentators do seek out misleading data. The Sun day Times Adwatch recently pointed out that a certain bank offering an interest rate on its current account of 5.38% actually required a balance of [pound]500,000 to qualify for this rate, and the rate on less than [pound]5,000 was zero. …