I think I’ve just about calmed down now.  Yesterday afternoon, I went to a short conference/seminar sort of thing supposedly about “the future of financial services distribution.”  It was quite jolly from a social and networking perspective, but, my goodness, the speakers were grim.

And, specifically, grim in a way that cast a kind of grim light on my last entry, about why financial advisers don’t seem to have noticed that the kind of “financial advice” I want is completely different from the kind of “financial advice” they provide.

The reason is simply that actually, on the basis of yesterday’s evidence, none of them has the faintest idea that I exist.  And it’s not just me:  they don’t have the faintest idea that any of my fellow 45 million UK adults exists either.  This is still by a million miles the least consumer-focused of all consumer-facing industries in the country.  Or indeed the universe.

I saw a very salesy presentation from the sales director of a platform provider who – perhaps not entirely surprisingly – told his story almost entirely in terms of the benefits he could offer the adviser, not the client;  then a presentation from a representative of a big bancassurer who, as far as I can remember, didn’t say anything of any interest at all but certainly didn’t give the poor bloody customer a look-in;  and then a really shocking presentation from the CEO of a large advice firm who talked about all the things you need to do to set up a successful advice business, with only one rather conspicuous exception:  think for a moment or two about your target market and what they might actually want or need from you.

With this total lack of market focus or awareness, you won’t be surprised to hear that the whole session seemed like a complete time-warp. Apart from some new regulatory jargon, and some new technology, we could have been talking about FS distribution ten, twenty or even thirty years ago.

All this led me to the unexpected conclusion that any business with even a modest ability to get close to consumers and understand their needs would be mad not to launch a financial advice arm.  You simply couldn’t fail to wipe the floor with this useless lot.�

Heaven knows I’ve rambled on enough over the years about the single most crucial – and in my view catastrophic – linguistic confusion in the world of financial advice.  The misuse of the word “advice” to describe any kind of interaction with the public, from what we would all be happy to call advice right through to what we would all most unhappily call ruthless churn’n’burn commission-driven selling, lies at the heart of many of the problems, confusions, regulatory flip-flops and levels of public odium that have tormented the sector for decades.  

But that’s not what I want to write about today.  Instead I just want to touch briefly on another confusion around the term “financial advice,” less pernicious but arguably more mysterious:  why is it that especially among the better class of firm and individual, including many of those working on a fee basis rather than commission, the broad term “financial advice” is used to describe a much narrower activity that any normal person would describe as “portfolio management”?

If we take it for granted that these “advisers” are only interested in clients up in the top, say, 5 to 10% of the affluence league, then I’m sure that almost all of these people must have a need for some sort of portfolio management, but also a much broader need for advice on all sorts of aspects of their financial lives.

Taking as an example a nice typical normal ordinary member of this target group – namely, me – I do need some help managing what you might call a “portfolio,” most of it held within my pension fund, but over the last year or so I’ve also needed, or wanted, advice on a range of matters including:

-  the tax implications of the sale of my business

-  funding further education for my two teenage children

– insurance for my growing (and ageing) fleet of motor vehicles

-  (the biggest issue recently) the financial implications of my parents-in-laws’ move into sheltered housing

-  some correspondence I didn’t understand about tax on my house in France from the local Tresor Publique

-  an argument with an insurance company when I had to make a claim on my buildings insurance

-  and of course my Schedule E tax return.

There are probably some other things that I’ve forgotten as well.  Yet to most financial advisers – and, indeed, to the well-known industry figure planning to set up a new fee-based IFA business who I met the other day – the needs in my list of bullet points are more or less invisible.  The only thing they see is the portfolio, and the only business that they want to do with me is to put this into exactly the same mix of assets as all their other clients, deliver third-quartile performance and charge me somewhere between 100 and 150 basis points for the privilege.

I can see why people would choose to describe themselves as “financial advisers” rather than “commission-driven salespeople,” but I really don’t understand why they want to call themselves “financial advisers” rather than “portfolio managers.”  I also don’t understand why their attentions, and intentions, are so tightly focused on the portfolio when the client would be so willing to pay more in fees to help resolve a much wider range of needs.

I suspect that all of this probably reflects the fact that the whole “advice” industry is still in a prety primitive state, having only just started its journey along the long road from sales monster to trusted ally.  It would be nice to think that as some of the better and more reputable firms continue along the path, they’ll gradually come to realise that the secret of long-term success is to understand, and satisfy, the real needs of their target market – and, I sincerely hope, as part of that process, to start using words in a way that clarifies, not obscures or obfuscates.

You know the Goldilocks Equilibrium – it’s the way you describe a sitution in which the middle one of three options is “just right.”  In the Goldilocks story, it’s about the softness of the three bears’ beds and the temperature of their porridge.  In the marketing director’s version, it’s about something completely different:  the scope and scale of the job.

Allow me to explain.  As I’ve written on a couple of recent occasions, many marketing directors in financial services businesses still bear the crushing burden of the “colouring-in department” tag.  They’re depressed, disappointed, embarrassed and worst of all massively constrained by the assumption, all round their businesses and especially at senior levels, that the main purpose of their departments is to turn other people’s work into brochures.

As I’ve also written on a couple of recent occasions, there’s another way of thinking about this:  that, au contraire, so far from being a print-farming backwater, marketers and marketing departments should sit right at the heart of the business, designing products and services, managing every aspect of customer experience, defining and supervising all the behaviours of all the business’s people and ultimately taking responsibility for its strategy for future success and continuing development.  And then, I guess, producing the brochures about all the above.

What now worries me is that if the former option is, so to speak, Baby Bear’s bed (too soft), then let’s be honest, the latter is probably Daddy Bear’s bed (miles too bloody hard).  For senior managers used to talking about marketing and marketers in sentences that include the adjective “fluffy” and the plural noun “crayons,” discovering that the people in question harbour a secret belief that they should have responsibility for all the business’s key strategic decisions would be a bit like the Queen discovering that her corgis had an eye on her throne.  In such circumstances, it’s difficult to believe that the first response of either party – senior business managers or monarch – would simply be to abdicate.

Which leaves the possibility of the Goldilocks Equilibrium:  is it possible for marketers to find a middle path that allows them to play a significant, but realistically not completely dominant, part in helping the organisation understand how it can suceed by identifying and then meeting its customers’ real needs?

The simple answer is that I don’t know, but I really do hope so.  If colouring-in is a humiliation, but corporate domination is a fantasy, then I guess marketers have to hope that like Goldilocks – but perhaps not quite so like Tony Blair in his quest for that elusive “Third Way” – they can find a clear and worthwhile option somewhere half-way in between. 

It’s obvious that the whole world of financial services is changing.  It’s obvious that all sorts of things – products, services, institutions – that we’ve taken for granted for many years have completely evaporated.  It’s obvious that the great pendulum which controls the climate in our industry has swung over the last 18 months or so the whole way from Greed to Fear – in fact, from Ravenously Greedy to Totally Terrified.

But getting from high-level abstractions like these down to a clear and detailed picture of what the new financial world is going to be like – now, that’s the hard part.  Is it simply that risk is out and certainty is in?  I think it must be a bit more complicated than that:  although the greed/fear dichotomy is by far the most powerful driver of people’s thoughts, feelings and behaviour, it’s not the only one.

And anyway, as we all know, it makes no sense to talk about the consumer financial market as a whole.  What are the differences between segments, and perhaps particularly between the affluent and the rest of us?  A vox pop on TV last night brought to life a point that I’ve tried to make on several occasions.  The speaker was a far-from-affluent person on the verge of retirement who for some reason was heavily exposed to RBS shares, now almost worthless:  Sir Fred Goodwin, she said, may well have lost a lot more money than she had, but he still has £16 million left while she has next to nothing. 

Sorry, I’m rambling.  I wouldn’t mind some help with this, if you feel like making a contribution.  In a subsequent blog entry, or newspaper article, or agency mailshot, or whatever, I want to write a piece called something like “20 Ways That The Future Of Financial Services Will Be Different From The Past,” or maybe a snappier version of the same thought if I can come up with one.  At the moment, I only have 12 or 13 ways, and quite a few of them are probably too obvious to be worth saying.  Anyone else’s crystal balls working better than mine?