Love Finance: angry regulators, trade bodies and beehives

Why we love finance this week?

This week we love finance because of the glare of the regulator, the struggles of trade bodies and RBS’s embrace of nanofluids and beehives.

Possible FCA commission ban on non-advised annuity sales

In the latest FCA consultation, Pension reforms - proposed changes to our rules and guidance, the FCA observed that consumers were at risk of not getting value for money from non-advised annuity sales.

The review identified evidence from the Financial Services Consumer Panel which highlighted cases of "anecdotal evidence that commission payments can in some circumstances exceed payments for an advised sale."

We love that consumers are being protected. However, given the already sizable advice gap being created in the new pension freedoms world, we wondered if this is a step in the direction of a new guided simplified sales channel via PensionWise, or if there’s a whiff of the next PPI scandal about this.

Asset management industry in turmoil due to the "blurring of the lines" between the roles of the IA and the FCA

This week comes the announcement that Schroders and M&G Investments, two of Britain’s biggest fund management companies, are quitting the Investment Association amid criticism from some in the industry that the reform agenda of the trade body has been “too aggressive”.

Along with these two titans of IM there is noise in certain quarters that three others (Fidelity, Invesco Perpetual and Aberdeen) are also considering their membership.

We love that trade associations are being cooperative with the regulator to ensure a unified and compliant industry. However, it’s important that this influential trade body remains independent and supports the interests of its members, rather than becoming a subsidised extension of a regulatory regime that they already pay a significant contribution toward.

RBS, beehives and nanofluids

The Royal Bank of Scotland, which reported a loss of £3.5billion in 2014, is looking at the regeneration of its Gogarburn headquarters in Edinburgh in a bid to reposition itself. It’s turning the building into a centre for innovation - supporting small businesses and start-ups in the local economy.

As part of this initiative, it is transforming the former executive wing into a start-up accelerator for entrepreneurs and they have invited eight firms whose specialisms range from nanotechnology to using beehives to boost biodiversity to test out their products.

We love that RBS is reinventing itself, but not so much that the taxpayer is having to fund it. We also wonder what is the value of a semi-nationalised bank biasing its activity on the local economy and its own headquarters?

Bank advertising works, but more so for challengers

A recent academic study by Elisabeth Honka-UCLA School of Management, Ali Hortacsu-University of Chicago and Maria Ana Vitorino-Carlson School of Management, identified some interesting observations on retail bank advertising.

The paper states that rather than trying to convince potential consumers to actually switch brands, bank advertising is actually primarily a shifter of awareness and consciousness of the brand.

As a result, advertising is useful at making consumers become aware of more potential options, enabling them to make more informed decisions. This scenario plays into the hands of the emerging or niche sector banking brands, as more and more people seek to find a better alternative.

Other interesting findings were that:

• Convenience plays a major part of peoples decisions
• People like the idea of a having someone they can talk to locally
• Consumers are usually aware of 5 to 7 banks but rarely consider more than 2 or

We love that the academics are providing evidence for what we’ve observed for ages, but we are more excited about finding new ways to leverage the advertising discipline so it can affect positive brand experiences and drive real consideration.