Forget the gimmicks – it’s trust we need

A wise move – but does your fund manager need to be involved?

I’m reading a book called No Small Change: Why Financial Services Needs a New Kind of Marketing. I know what most readers will think: financial services don’t need better marketing, they need better products. That’s partly fair – and possibly why the book suggests that the industry gives up on the “impossible task of restoring trust” and instead just works on “managing consumer distrust”.

There are, say the authors, two different elements to this trust. There is competence – can you trust a given institution to sort your mortgage, keep your savings safe, pay out your pension, and return your investments when you ask it to? The second is about intention. Do we believe that the institutions in question have our best interests at heart?

The answer to the first question is mostly yes; to the second, almost always no. That is probably impossible to change. So the best way to sell us products is not through touchy-feely stuff, but by being clear on competence. Have simple, transparent, low-cost products with structures everyone can understand well enough to see where they are and are not being ripped off, and thus have trust in.

If I were launching a new financial product, it’s exactly what I would do. Sadly No Small Change has not yet been distributed widely. If it had, perhaps we would not be being subjected to Vitality’s new range of investment products, VitalityInvest.

At their core these aren’t complicated – as far as I can see, they are just passive portfolios run by Vanguard and Investec. But Vitality seems to have worked very hard indeed to turn them from simple, cheap offerings into complex gimmicks of variable price.

There’s going to be an Investment Booster, a Retirement Booster and a Healthy Living Discount available. Do various healthy things and your charges will be cut. The goal is to “incentivise simple behaviour changes to encourage people to live healthier lives while saving more”. It is, says Vitality, about bringing together “investments and wellness”.

I think the company means well – and a healthier nation wouldn’t be all bad. But I’d say it’s more about bringing together scary levels of personal data collection and complication – both things I definitely don’t want from my fund manager and that I also don’t want to become commonplace in investing. I have very little emotional trust in the industry now. I’ll have even less once it has its grubby hands on details of how many steps I take a day, and what my heart rate is after dinner.

A word of advice, then, for the industry. When looking at new products, don’t ask what “fun” bells and whistles you can add, so that you can indulge in “fun” marketing campaigns to attract “the young”. Ask this instead: can the product be simpler? Can it be cheaper? Can its functionality be trusted? That, I think, will go down rather better with MoneyWeek readers – and, for that matter, with everyone else.

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