OK, so many of us have finished reading the FAMR report. Despite what some other commentators have said, there is some new thinking with potential for some real improvements to the current regime. For example, the Pensions Dashboard gives an opportunity to deliver some tangible consumer benefits.

It’s essential that the definitions of advice are resolved quickly to support expansion of services for those consumers not able, or willing to pay for full advice. If you consider the different terms for advice, guidance etc. etc. there are 11 different ways of describing advice covering; full advice, guidance, simplified, basic, generic etc. It’s no wonder consumers are confused, and I would hedge that many in the industry don’t know the difference between the terms and would fail a test?

What we need are just 2 definitions of service, described in simple consumer language. Here’s a starter for debate;

1. This is a service for which XYZ and CO takes full responsibility if you follow the personal recommendations they give you.

2. This service does not involve any personal recommendations and when you use it you must accept that you are taking full responsibility for your own actions.

In service 2, guidance should be included, as the information given would not be customer specific, however the provider must clearly meet all other regulatory standards and conduct rules.

Service design against a clearly defined checklist

In designing services, I see no reason why a checklist can’t be produced by the FCA, so providers can validate which of the 2 labels from 1 and 2 above will apply, so avoiding any grey areas.

This should enable providers to clearly label and communicate the service to the consumer at the start of the consumer interaction. I would advocate that we have a standard industry icon for each service type, which all providers adopt, so making it instantly recognisable to the consumer.

Testing customer understanding

As part of the process we should adopt a method which tests the consumer’s understanding of the service they have received just before the transaction completes.

If a client misunderstands the type of service they have just received, then the transaction should be halted until they have had a chance to review the information and if necessary, reconsider their actions.

A major Bank we have been working with has been doing this for the last 20 months. Our software solution has identified a number of customers who perceived they were being advised and subsequently helped them to fully understand that the service was not personal financial advice. In these cases, they are directed to speak to either a financial adviser, or via an offline process they confirm they are happy to proceed without advice. In addition, we also test other aspects of the product purchase, such as reason for buying and their expectation of what benefits the product will provide. Again, if they misunderstand the product, the software will address this by halting the process until the customer is further educated and has given their permission to complete the transaction. By using the software, we can demonstrate there has bene no consumer detriment plus we have new and valuable real-time data to improve messaging, content and customer journey design.

Engagement through confidence

There a number of other challenges to consider from the FAMR Report and consumer accessibility was highlighted as one of them. A lack of confidence reduces consumers’ willingness to engage and make their own decisions. The research we carried out last year with Opinium, and are currently repeating, showed how a range of initiatives can improve consumer confidence to go it alone. The point of purchase testing came out highest alongside other tactics. The interesting point was that it is not a one size fits all solution. Different segments were more or less likely to engage with different methods. In our next round of research we will also be exploring robo-advice in more detail. Our early hypothesis is that robo-advice is not going to be a panacea for everyone.