Soul-searching has become a regular pastime for those in the financial services industry. They are faced with a depressed stock market, job losses, tighter regulation from the Government and the loss of consumers’ trust.
Last week, Sir Howard Davies, the outgoing chairman of the Financial Services Authority declared that the industry was in the midst of a ‘retail market failure’ and expressed disappointment at the fact that financial services companies had failed to learn from the past. Marketing of financial products has come under increasing scrutiny following various misselling scandals relating to pensions in the Eighties, then endowment mortgages and now split capital investment trusts. Davies does not think it will stop there. He even queries whether a range of simple savings and investment products proposed in the Sandler Report and due to be introduced in 2005, will further expose the industry to charges of mis-selling as these are designed to be sold with little advice.
Inevitably some are asking the question whether marketing has failed the financial services industry. Marketers stand accused of dressing-up products based on their past performance and developing new products that draw in consumers, but which the financial wizards have found difficult to make work. However, research produced for the Financial Services Forum – a membership organisation for financial marketers in the UK – suggests the opposite, with 45 per cent of marketers polled believing that their companies pressurise them to focus on ‘the wrong areas’. Testimony from agencies tends to back this up with financial services marketers expected to clear decisions higher up the chain of command.
Whatever the rights and wrongs of the past, the financial services industry must learn how to use marketing to overcome consumers’ inherent distrust in the sector. There is little sign of a stock market recovery and the industry cannot rely on an equity boom to woo consumers back to the fold. Troubled times also mean that there is additional pressure to make sure that every pound spent on marketing is effective, a discipline that has been somewhat lacking in the financial services industry.